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The US economy is sending mixed signals as the holiday season approaches. As inflation shows signs of cooling, it went up slightly last month, and record interest rates on credit cards more than 23% of them undermine household budgets. The National Retail Federation reports that the average American plans to spend $902 on Christmas gifts and decorations this year — expenses that often land on credit cards.
“The best people suffer from the worst vacation debt,” says Howard Dvorkin, CPA and president of Debt.com. “They don’t spend too much on themselves, but on others. When I [tell] to stick to their vacation budget, they worry about appearing cheap in the eyes of their friends and family. » This well-intentioned generosity brings many people into the New Year. buried under credit card debt.
To help you avoid holiday debt, we consulted financial experts about the warning signs that indicate you might need debt relief before adding seasonal expenses. Below, they share the red flags that often go unnoticed — and how to address them before they become major problems.
Find out what your credit card debt reduction options are here.
5 Signs You Need Debt Relief Before the Holidays
While emotional stress may be your first clue, these five other subtle warning signs may indicate you need debt relief before the holidays.
1. Your credit score drops
Martin Lynch, president of the Financial Counseling Association of America (FCAA), says that dropping your credit score could signal trouble ahead. Many don’t notice their debt increasing because it happens gradually. Although these small increases may seem manageable, they gradually reduce your credit score. Monitoring gradual changes in your score can help you spot debt problems before they become insurmountable.
Learn how to tackle your costly credit card debt now.
2. You receive unsolicited credit card offers with high interest rates
Those credit card offers flooding your mailbox could reveal more than you think about your financial health. “If unsolicited credit card offers offer high introductory interest rates, that means you’re riskier than you thought,” warns Lynch.
You might assume that you deserve low rates because you’ve never missed a payment. However, lenders look beyond payment history. They closely monitor how much of your available credit you use. When your balances get closer to the credit limits, new lenders view you as a higher risk. Their offers reflect this with higher interest rates.
3. You receive mail from subprime lenders or debt settlement companies
These are not random marketing attempts. According to Lynch, subprime lenders and debt settlement companies actively seek out consumers struggling with debt. “[They] buy access to credit reports by searching for high debt levels,” he says.
If you’ve noticed more of these offers in your mailbox, consider this a warning. These companies see something in your credit profile that suggests you are having difficulty managing your debts. Talk to a reputable credit counselor who can help you turn things around.
4. You don’t pay more than the minimum payments
Do only minimum payments on your credit cards could keep your accounts up to date. But “not paying more may be a sign that you are [stretching your budget too thin]”, warns Margaret Poe, head of consumer credit education at TransUnion. She emphasizes that only paying what you duty That means you could spend decades paying off your balance while racking up more interest charges.
5. Your credit utilization rate is high
Your credit utilization rate it may not show up on your monthly statement, but lenders pay close attention to it. Credit utilization measures the percentage of credit you use compared to your credit limit. This key metric helps determine whether you are managing your credit cards responsibly.
Most credit specialists recommend keeping utilization below 30%. This is even more essential during the holiday shopping season. Before making seasonal purchases, Poe suggests asking yourself, “Am I able to quickly pay off the balance if I buy this gift with my credit card?” Otherwise, you may need to consider a debt management program.
The essentials
Don’t wait until holiday debt gets out of control. “If you owe more than [what] you can repay comfortably in three months, consult a debt professional,” advises Dvorkin. Many debt relief companies offer free initial consultations and in-depth analyses. They can help you explore credit card debt forgiveness Or debt consolidation loans — create a plan that protects your finances during the holiday season and beyond.
