‘Tis the season to shore up your savings.
In the days leading up to Black Friday, financial experts caution against overspending, particularly amid an economic crisis due to the coronavirus pandemic — and consumers are listening.
One campaign, called “In the Black Friday,” spearheaded by the National Financial Educators Council, encourages consumers to avoid debt this holiday season and save for longer-term financial goals.
Already, shoppers said they plan to spend less overall this year — shelling out an average of $997.79 in total, down $50 from 2019.
More from Personal Finance:
5 year-end strategies to save on your 2020 taxes
12 million Americans set to lose unemployment benefits
Money may be tight during the holidays. How to prep your kids
Pre-pandemic, holiday spending had been edging higher nearly every year, resulting in credit card balances that take longer and longer to pay off.
In 2019, Americans racked up about $1,325 in holiday debt, up 8% from the year before, according to MagnifyMoney’s annual post-holiday debt survey.
Although credit card interest rates have fallen since the Federal Reserve lowered its benchmark interest rate to near zero in March, credit cards are still one of the most expensive ways to borrow money.
Card rates are near 16%, down from a record high of 17.85% in July.
If you only made the minimum payments on a $1,325 balance, it would take more than five years to pay it off, while racking up more than $600 in interest charges (assuming an interest rate of about 15%).
Wrapping your credit cards with financial goals is one way to keep your spending in check, advised Pamela Yellen, the author of “The Bank On Yourself Revolution.”
“Every time I take a card out, I see a picture or some words that represent a goal that’s important to me,” Yellen said. “I get the opportunity to stop and decide whether what I’m about to purchase is more important than that goal.
“If it is or it doesn’t undermine my goal, I might go ahead and buy it,” she added. “If it isn’t, I get the satisfaction of knowing I’m a step closer to my goal because I chose to not purchase the item.”
Subscribe to CNBC on YouTube.