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The US economy is sending mixed signals as we head into the holiday season. As inflation shows signs of cooling, it ticked back up rather last month, and record high credit card interest rates above 23% squeezing the household budget. The National Retail Federation reports the average American plans to spend $902 on holiday gifts and decorations this year — spending that often goes on credit cards.
“The best people suffer from the worst holiday debt,” says Howard Dvorkin, CPA and chairman of Debt.com. “He overspends not for himself, but for others. When I (tell) him to stick to his holiday budget, he is afraid of looking cheap to friends and family. This kind generosity leads many people to start the new year buried in credit card debt.
To avoid holiday debt hangover, we asked our financial experts about the warning signs that indicate you may need debt before your seasonal expenses add up. Below, he shares the red flags we often don’t recognize — and how to address them before they become major problems.
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5 signs you need debt relief before the holidays
While emotional stress may be your first clue, these five subtle warning signs may indicate you’re in debt before the holidays.
1. Your credit score is down
Martin Lynch, president of the Financial Counseling Association of America (FCAA), says a drop in your credit score could signal trouble ahead. Many don’t even notice their debt is growing because it happens gradually. While these small increases seem manageable, they regularly chip away at it your credit score. Watching your score change gradually can help you spot debt problems before they become too much.
Learn how to deal with expensive credit card debt today.
2. You are receiving an unsolicited credit card offer with a high interest rate
Those credit card offers flooding your mailbox may reveal more than you think about your financial health. “If a credit card you don’t want offers a high introductory interest rate, it means you’re at more risk than you think,” Lynch says.
You may think you deserve a lower rate because you never miss a payment. However, lenders look beyond payment history. They closely monitor how much available credit you use. As your balance approaches the credit limit, new lenders see you as a higher risk. The offer reflects this with higher interest rates.
3. You’re getting mail from a subprime lender or a loan company
This is not a random marketing effort. According to Lynch, subprime lenders and debt settlement company actively looking for consumers struggling with debt. “(They’re) buying access to credit reports looking for high credit,” he said.
If you notice more of these offers in your mailbox, take it as a warning. The company sees something in your credit profile that shows you have problems managing debt. Talk to a reputable credit counselor who can help you turn things around.
4. You fail to pay more than the minimum payment
Just do it minimum payment on credit card can keep your account current. But “failure to pay more can be a sign of you (stretching your budget too thin),” cautions Margaret Poe, head of consumer credit education at TransUnion. He insists that you pay only what you are must that means you could spend decades paying off your balance while incurring other interest charges.
5. Your credit utilization ratio is high
Your credit utilization ratio it may not show up on your monthly statement, but lenders pay attention to it. Credit utilization measures the percentage of the amount of credit you have used compared to your credit limit. These key metrics help reveal whether you’re managing your credit cards responsibly.
Most credit specialists recommend keeping your utilization below -30%. This is even more important during the holiday shopping season. Before making any seasonal purchases, Poe suggests asking yourself: “Can I pay off the balance right away if I buy this gift using a credit card?” If not, you may need to look into a debt management program.
Bottom line
Don’t wait until your holiday debt gets out of control. “If you owe more than (what) you can comfortably pay off in three months, consult a debt professional,” Dvorkin said. Many debt relief companies offer free initial consultations and in-depth analysis. They can help explore forgiving credit card debt or debt consolidation loan – create a plan that protects your finances during the holiday season and beyond.
