Holiday credit card debt looming for millions

In the coming month, millions of consumers will spend large amounts of money making sure they buy all the gifts they feel the people on their holiday shopping lists need. But doing so leads many Americans into hundreds or even thousands of dollars worth of credit card debt, and that can create huge financial problems in the new year.

There is now a wealth of information about consumers' credit card spending habits and most data shows that during the holiday season, many feel significant pressure to take on large financial loads to make sure all gifts are accounted for, according to a report from the Deseret News. This might be exacerbated further this year, as the improving economy has led many to feel better about their personal financial standings, and as such has already encouraged many consumers who might have eschewed credit card use following the recession to return to this type of spending.

Growing trends
Already this year, there has been a significant uptick in the amount of money people owe on their credit cards, the report said. Between July and September alone, well ahead of the holiday shopping season, the amount of average credit card debt per borrower rose 4.9 percent. And in a recent poll of consumers across the country, NBC News found that 45 percent said they'd rather skip the holiday season altogether, largely due to financial concerns.

Certainly, those worries are borne out in statistics culled at the end of 2011, when as many as 14.1 million Americans were making efforts to pay down debts accumulated in the 2010 holiday shopping season, the report said. Those financial issues may only serve to aggravate the stress felt in the run-up to this year's holiday season, as piling new debts on top of old ones can only make it more difficult to pay bills in the future.

The pressure to participate
There are a lot of reasons consumers might work so hard to make sure they buy a large amount of presents during the holiday shopping season, such as pressure applied by family and friends and their own gift-buying efforts, the report said. But beyond that, there is also the temptation to shop for the best possible deals.

For instance, many of the nation's largest retailers, eager to get a jump on the shopping season, started running their Black Friday sales on Thursday night, the report said. These were previously reserved exclusively for the morning after Thanksgiving, but the clamor for more consumer dollars likely led many stores to start pushing their large discounts earlier.

But it seems that many are also aware of the fiscal constraint under which consumers may now be operating, as some began offering numerous financial options that may not have been available in the past, the report said. For instance, layaway has made a big comeback in the last few years, and this year many big chains are also rolling new credit options that create the illusion of affordable holiday shopping, but typically only lead to more debt.

The need for planning
Because many consumers cannot help but avoid major holiday shopping every year, and because the temptation to add to one's debt is often so overwhelming, it's important for borrowers to do all they can to properly prepare for the additional balances that lurk around every great gift idea, the report said. This can include making a list of everything one wants to buy, then making sure to shop around to find the best possible prices on those items (and when buying online, making sure to factor in shipping costs to the final price tag so that any savings found on a site aren't wiped out).

Further, it's usually a good idea to try to come up with a budget for how much one can afford to spend during the entire holiday season. By comparing this figure to the items on their shopping list, borrowers can see whether they're staying within the framework they set for themselves, or are exceeding it. In the latter case, choosing to pare items from that shopping list, or even cutting people from it, might help to ensure that a person doesn't rack up too significant a holiday debt total.

Large debt totals can also do more harm in the form of lower credit scores for consumers, given that 30 percent of a rating is made up of the amount owed versus total credit limits. However, another issue many consumers may face that takes a toll on their standings is unfair markings on their credit report. Fortunately, borrowers may be able to work with a credit repair law firm to repair the damage done by these entries and return their credit to where it deserves to be.