Forty-two percent of households carrying credit card balances reported their debt as ‘unmanageable,’ a significant increase from 38 percent in 2022

As area residents head into the holiday season, Kristen Gillis, branch manager at OnPoint Community Credit Union, recently shared her tips for careful financial planning.  

Americans are struggling more than ever with credit card debt, as balances carrying interest rose by 25% in 2023, according to a report from Financial Health Network. Forty-two percent of households carrying credit card balances reported their debt as “unmanageable,” a significant increase from 38% in 2022.  

Gillis points out the holiday season can be a time of joy, but without proper planning, holiday spending could lead to long-term financial strain. She says that now is the time to start planning for a financially sustainable holiday season.  

Gillis works with many community residents to help them take proactive steps to safeguard their finances. Here is a list of what she advises: 

OnPoint Community Credit Union’s financial tips to prepare for holiday expenses 

1. Create a gift list early. List the people you plan to buy gifts for and set spending limits for each person. Prioritize your spending by focusing on immediate family or closest friends and consider alternatives like group gifts or Secret Santa arrangements to reduce your overall expenses.  

2. Cut back on nonessential spending. Before diving into holiday shopping, review your bank statements and identify expenses to cut to create a little extra room in your budget. Consumers spend an average of $219 a month on subscription services. Stay on top of your subscriptions and keep track of auto-renewal dates, so you cancel the ones you no longer need. Consumers spend $3,639 annually on food away from home, which comes out to about $300 per week, according to the Bureau of Labor Statistics. Meal plan to save on groceries, takeout orders and restaurant tabs. Calculate how much you will save after you tighten these areas and put that amount into your holiday budget. 

3. Set a realistic holiday budget. It’s tempting to overspend during the holidays but stick to a budget based on what you can truly afford. Overspending leads to credit card debt that could take months or even years to pay off. Keep in mind that the average credit card rate is now nearly 23%, so any unpaid balance can grow fast. By starting now, you can also take advantage of sales, compare prices and spread out your expenses over time, lessening the blow to your budget. 

4. Use tools to stay on track. Use budgeting tools and apps to manage your finances, track spending and plan accordingly for the holiday season. OnPoint has a variety of free tools for everyone to use, including calculators to help you create budgets, debt repayment plans and savings plans. 

5. Pay off debt with an avalanche, not a snowball. If you have debt, there are two popular repayment strategies: the snowball and avalanche methods. The snowball method involves paying down your smallest debt first and working your way up to the largest, providing a sense of achievement as you work your way up the list. But in a high-interest rate environment, Kristen Gillis recommends the avalanche method. Tackling debts with the highest rate first eliminates your most expensive debt sooner and reduces the amount you pay in interest over time.  

6. Simplify repayment by consolidating debt into a single loan. Check with your financial institution if you can refinance your accounts that have higher rates. Consider combining all your debts into a single loan to simplify repayment. Both approaches may provide a lower monthly payment and lower interest rate, saving you money every month. Talk to your financial institution about what debt restructuring options they offer. For example, OnPoint offers a service called GreenPath Financial Wellness, which provides confidential and complimentary one-on-one financial counseling, debt management services and financial education resources. 

7. Be mindful of credit limit increases. A credit limit is the maximum amount you can spend within your line of credit. It is determined by several factors, including your credit score, payment history, age of accounts and monthly income. Some credit card issuers provide automatic credit limit increases based on usage and if your account is in good standing. You can also request a credit limit increase to increase your borrowing power for the holidays. But you should avoid increasing limits solely to expand spending capacity and only request them if you can repay the potential debt increase.

For more information, go to https://www.onpointcu.com/.