The Mint app has shut down as of Jan. 1, 2024. For alternatives, check out CNBC Select's ranking of the best budgeting apps.
With the holiday season behind them, Americans are battling a financial hangover in the form of debt. For many of them, it was a rude surprise.
A recent survey from LendingTree found that holiday debt reached alarming new heights. Moreover, most of the holiday shoppers who took on debt hadn't planned for it. Below, Select explains why more people found themselves in unexpected holiday debt — and what to do if you're one of them.
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When high inflation meets high stress levels
According to the survey from LendingTree, 35% of Americans took on holiday debt in 2022 — about the same percentage as last year (36%). But the average debt jumped to $1,549, up 24% from last year's $1,249. This is the highest the company has seen since it began tracking average debt levels in 2015.
Even worse, this debt wasn't a strategic choice for most shoppers. The survey found 63% of those who took on debt this past holiday season didn't plan to do so, up from 54% in 2021.
"Prices are up for everything," says Howard Dvorkin, CPA and chairman of Debt.com. "[People] are trying to make ends meet but they didn't want to come off looking like the Grinch during Christmas… They went to the store saying, 'Okay, I'm only going to spend $25 for a shirt for uncle George.' And you get to the checkout, and that $25 shirt is now $40."
Dvorkin says another contributor to the increased debt could be people engaging in some retail therapy after a stressful year.
"We as a country have been beaten up psychologically," he says. "And I think to put a little happiness into people's lives, they're willing to extend themselves financially."
A survey from the American Psychological Association last year found that 87% of Americans felt as though there had been "a constant stream of crises without a break over the last two years," backing up the assertion that people may have decided to make the holidays as merry as possible this year — even if it put them in debt.
What to do if you're in holiday debt
With interest rates skyrocketing, prioritizing paying off your holiday debt is a wise idea. Here are a few things you can do.
Review your budget
Before you can begin tackling your debt, you need to understand your cash flow down to the last cent. Determine how much debt you have and your monthly expenses. Cut back on spending where you can, and then decide how much of your debt you can pay down each month. Most importantly, make sure your new budget strikes a balance between living your life and getting out from under debt.
Fortunately, there are plenty of tools that can help you get a handle on your budget, such as Mint and You Need a Budget (YNAB).
Bring in more money
Besides cutting your expenses, see if you can earn some extra cash. You probably can't just demand a raise at work, so consider a side hustle and see if there's anything you don't need that you can sell.
"You know, you get all these gifts and you don't know what to do with them," Dvorkin says.
"Start going through that pile and sell the stuff off to generate money."
If you have any gift cards you're not going to use, you can also sell them for cash and put it toward paying off your debt.
Use a balance transfer card
If (despite your debt) you have excellent credit (meaning you have a FICO score of 800 or higher), you might qualify for a balance transfer card. This type of credit card allows you to move balances from your other cards and pay them off without interest during a 0% APR promo period.
Currently, you can find balance transfer cards that offer up to 21 months of no interest:
The Citi Simplicity® Card may not earn rewards, but it can still save you money due to its amazing intro-APR offers.
The Wells Fargo Reflect® Card can help you save on interest charges thanks to its extra generous intro-APR offer on purchases and qualifying balance transfers.
Highlights
Highlights shown here are provided by the issuer and have not been reviewed by CNBC Select's editorial staff.
- Apply Now to take advantage of this offer and learn more about product features, terms and conditions.
- 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers. 17.74%, 24.24%, or 28.49% variable APR thereafter; balance transfers made within 120 days qualify for the intro rate, BT fee of 5%, min: $5.
- $0 annual fee.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
- Through My Wells Fargo Deals, you can get access to personalized deals from a variety of merchants. It's an easy way to earn cash back as an account credit when you shop, dine, or enjoy an experience simply by using an eligible Wells Fargo credit card.
Balance transfer fee
5%, min: $5
Foreign transaction fee
3%
Take out a debt consolidation loan
If you have debt balances across multiple credit cards or don't have a high enough credit score to qualify for a 0% APR card, a debt consolidation loan could help. These are personal loans with a low APR to cover all of your card balances — often at a much lower interest rate than a credit card. This gives you a single loan to pay back, instead of multiple cards, with fixed monthly payments, all the while saving on interest fees.
Below are some of the best debt consolidation loans:
We like that Upstart considers factors besides credit score, including education, income and employment history. Co-signers aren't accepted.
We like that LightStream offers competitive APRs, no late or origination fees and long loan term options. But you can't prequalify and the loan minimum may be too high if you only need to borrow a small amount.
Bottom line
High inflation and even higher levels of economic uncertainty have impacted Americans in a myriad of ways. Some have chosen to cope by splurging during the holiday season.
If buying gifts for your nearest and dearest (or even just yourself!) have landed you in debt, it's best to take care of it soon. Debt repayment might be a painful process, but the longer you wait, the more it will cost you — thanks to disturbingly high interest rates.
"You've got to take on it. You've got to do it now." Dvorkin says. "It's easy to put your head in the sand and hope things will go away, but hope is not a good strategy for getting out of debt."
