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The U.S. economy is sending mixed signals as we enter the holiday season. While inflation shows signs of cooling, it ticked back up slightly last month, and record-high credit card interest rates above 23% are squeezing household budgets. The National Retail Federation reports the average American plans to spend $902 on holiday gifts and decorations this year — expenses that often land on credit cards.
“The best people suffer the worst holiday debt,” says Howard Dvorkin, CPA and chairman of Debt.com. “They overspend not on themselves, but on others. When I [tell] them to stick to a holiday budget, they fear looking cheap to their friends and family.” This well-intentioned generosity leads many to start the new year buried in credit card debt.
To help you avoid a holiday debt hangover, we consulted financial experts about the warning signs that indicate you might need debt relief before adding seasonal expenses. Below, they share red flags that often go unnoticed — and how to address them before they become major problems.
Find out what your credit card debt relief options are here.
5 signs you need debt relief before the holidays
While emotional stress can be your first clue, these five other subtle warning signs might indicate you need debt relief before the holidays.
1. Your credit score is dropping
Martin Lynch, president of the Financial Counseling Association of America (FCAA), says that drops in your credit score might signal trouble ahead. Many don’t notice their debt growing because it happens gradually. While these small increases might seem manageable, they steadily chip away at your credit score. Watching for gradual score changes can help you spot debt problems before they get overwhelming.
Learn how to tackle your expensive credit card debt now.
2. You’re receiving unsolicited credit card offers with high interest rates
Those credit card offers flooding your mailbox might reveal more than you think about your financial health. “If unsolicited credit card offers quote high introductory interest rates, that means you’re riskier than you might have thought,” cautions Lynch.
You might assume you deserve low rates because you’ve never missed a payment. However, lenders look beyond payment history. They closely watch how much of your available credit you’re using. When your balances climb closer to credit limits, new lenders see you as a higher risk. Their offers reflect this with steeper interest rates.
3. You’re getting mail from subprime lenders or debt settlement companies
These aren’t random marketing attempts. According to Lynch, subprime lenders and debt settlement companies actively look for consumers struggling with debt. “[They] buy access to credit reports looking for high levels of debt,” he says.
If you’ve noticed more of these offers in your mailbox, take it as a warning. These companies see something in your credit profile that hints you’re having trouble managing your debt. Speak with a reputable credit counselor who can help you turn things around.
4. You’re failing to pay more than the minimum payments
Making only minimum payments on your credit cards might keep your accounts current. But “failing to pay more can be a sign you’re [stretching your budget too thin],” cautions Margaret Poe, head of consumer credit education at TransUnion. She stresses that paying only what you have to means you could spend decades paying off your balance while accruing more interest charges.
5. Your credit utilization ratio is high
Your credit utilization ratio might not show on your monthly statement, but lenders pay close attention to it. Credit utilization measures the percentage of how much credit you’re using compared to your credit limit. This key metric helps reveal whether you’re managing your credit cards responsibly.
Most credit specialists recommend maintaining a below-30% utilization. This is even more paramount during the holiday shopping season. Before making seasonal purchases, Poe suggests asking yourself: “Am I able to promptly pay down the balance if I buy this gift using my credit card?” If not, you may need to look into a debt management program.
The bottom line
Don’t wait for holiday debt to spiral out of control. “If you owe more than [what] you can comfortably pay off in three months, consult a debt professional,” urges Dvorkin. Many debt relief companies offer free initial consultations and in-depth analyses. They can help you explore credit card debt forgiveness or debt consolidation loans — creating a plan that protects your finances through the holiday season and beyond.