JEFFERSON CITY, Mo.. — Red may be a festive color during the holiday season, but it isn’t a good look for a bank account. And experts warn that racking up holiday debt can lead to a cycle that’s hard to break.
The average American will spend $936 on holiday gifts this year – the second highest amount on record, according to the National Retail Federation. Financial literacy specialist Kathryn Greiner said the pressure to spend this time of year can push consumers to extreme measures, including turning to payday lenders.
“About 75 percent of all payday loans are payoffs for old payday loans,” Greiner said. “And a lot of folks who use these end up taking not just weeks, but years to pay them off.”
Greiner said using cash instead of credit cards to pay for holiday purchases can help curb the tendency to overspend. She also recommended developing a written budget for next year’s holidays as soon as this year’s festivities are over.
Many credit unions offer free financial counseling to help their members stick to their financial goals.
The urge to keep up with the Joneses can be particularly hard to avoid this time of year, but Greiner said spending beyond one’s means only serves to suck the joy right out of the season.
“I see a lot of people who are kind of miserable over the holidays or dread them, because they can’t keep up,” she said. “It’s a pressure that they can’t even face and it’s hard to articulate.”
She added that it’s especially important for spouses and partners to have an open, honest talk about what they can and cannot afford.
According to a recent survey, more than 1-in-4 Americans plan to rack up debt this holiday season that will take longer than an month to pay off, two-thirds of whom expected they would need three or more months to get caught up.
(Veronica Carter, Missouri News Service)