Holiday debt could take years to be paid off: report

Consumers were rightly looking forward to the holidays, but the ensuing hangover – along with a market downturn, rising interest rates and a government shutdown now in its third week – could dampen all that joy.

While soaring spending last month may have contributed to the best holiday shopping season in years, Americans racked up more than $1,000 in holiday debt at the end of last year, according to the MagnifyMoney’s annual post-holiday debt survey. On top of that, 28% of shoppers entered the season while paying off debt from the 2017 festivities.

Even still, most Americans continue to borrow ever increasing amounts. According to data from the Federal Reserve, the United States has passed $1 trillion in credit card debt, the highest level since the Great Recession.

The average household carries a balance of $6,929 month-to-month and shells out about $1,140 a year in interest, according to NerdWallet.

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The Fed’s recent interest rate hikes put an immediate damper on these already stretched budgets. Tackling the latest 25 basis point hike will cost credit card users about $1.6 billion in additional finance charges, according to a separate analysis by WalletHub.

Of those who put all those holiday gifts on plastic, less than half of shoppers, or 42%, said they would pay off the debt in three months or less. Plus says it will take five months or more to pay it off, MagnifyMoney found. Almost a quarter, or 22%, said they would only make the minimum payments.

For a borrower making a minimum payment of $30 per month on a $1,230 tab, that means it would take over five years to pay off the balance – and you’d also be paying $592 in interest over that time (assuming an annual percentage rate of 16.5%).

MagnifyMoney surveyed 769 adults in December.

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