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Addressing the Holiday Debt Problem: How to Spend Less This Year


Credit: Who is Danny via Freepik

For some, debt is every bit a part of the holidays as a turkey and some mistletoe. Credit cards, Buy Now, Pay Later (BNPL) financing, and personal loans are the only way some people can afford the festivities with all the extra spending expected at the end of the year.

According to a MoneyGeek survey, 1 in 3 US shoppers put more than 90% of their purchases on credit cards last year. Unfortunately, 44% of Americans still hadn’t paid off their holiday spending by February.

After three months, an outstanding balance adds interest. And, if you can’t manage the minimum, it can come with late fines and credit damage.

Nobody wants to star the new year with bad credit, so what can you do to prevent this from happening? Take a look at these holiday tips to for using credit.

Knowing Where Each Kind of Credit Fits into Your Holiday Plans

You can borrow money in many different ways this holiday. Let’s check out these common types of installment loans, BNPL financing, and credit cards to see where they fit into your plans

Credit Cards

Guides that suggest you leave your credit card at home are out of touch with the modern world. Most of us do our shopping online, and many big-ticket items require credit to put down a deposit. In all likelihood, you will have to use the plastic in your wallet all throughout the season.

To avoid over-dipping into your credit, treat your cards like they’re cash. When spending cash, you only have the bills in your wallet to use. Once they’re gone, you can’t spend any more. So forget about your credit limit and focus on your spending limit. Only charge as much as this limit to avoid debt you can’t repay.

Personal Loans

Personal loans have a far more niche place in the holidays than credit cards. Rather than an everyday shopping tool, personal installment loans are available for emergencies.

Yes, even the most wonderful time of the year can go sideways. You can clip a cement bollard in a crowded mall parking lot, chip your tooth on rock-hard caramel, or a guest can break your front door.

If you don’t have savings, you can look into installment loans to cover these unexpected expenses.

BNPL Financing

Buy Now, Pay Later financing is a growing tool for cash-strapped shoppers. In a way, it acts like other installment loans that you pay off in multiple payments, except for these key differences:

  1. You don’t borrow money from a bank, credit union, credit card company, or online lender.
  2. You receive funding from intermediaries that have a partnership with the online store.
  3. You may not accrue interest or pay finance charges on your funds.

BNPL financing, when used wisely, can be a great way to balance your budget during the busy holidays. But be wary of how many BNPL purchases you make. It can be easy to lose track of your payments when individual payments are so low. You might not be aware your total financing exceeds your budget.

Bottom Line:

Certain loans and financing will have a place in your holiday plans. Follow today’s tips to keep holiday debt from delivering a lump of coal in your stocking.

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