Credit card debt hits record levels

We're just a week out roughly from one of the biggest shopping days of the year, black Friday, and then cyber Monday, consumers are expected to spend an average $1,069 on holiday purchases in 2024. And guess what? That's up 14% from last year. According to retail, me not this comes as credit card debt hit a record $1.17 trillion in the third quarter of 2024, according to the New York fed. So how do you avoid adding more debt during the holidays? My next guest is David Peters. He is the founder of Peters professional education and a Peters tax preparation and consulting. Good to have you here. All right. You hear a figure like $1.17 trillion and you got a lot of consumers out there trying to figure out how they can spend, but spend smartly and also pay down some debt. Perhaps let's, let's start with setting up smart habits going into this season. How can people make sure that they are setting a budget, checking it twice, sticking to it, and ultimately kind of rolling out some people who might've been naughty on that list? Yeah. So, I mean, I think that you hit the nail on the head. I mean, I think that's a, the big thing to really sort of get across immediately is really having a good budget and sticking to it. And, uh, there are, uh, you know, lots of ways to keep track of a budget. Uh, but, uh, in my opinion, uh, utilizing a spreadsheet and, uh, creating that spreadsheet and keeping track of that on a daily basis as you're going out shopping during that busy season, I think is the way to go. Another thing is, is just really, uh, making sure that we use cash, uh, whenever that's possible. We, uh, see that cash, uh, going out of our wallets and, uh, that helps us, uh, stay within budget, uh, stays, uh, because we see that money disappearing. Certainly. And so one of the other tips that you had on there really looks towards the rewards part of your balances as well. How can you deploy rewards during the season? Well, uh, there are a lot of credit cards that offer cash back rewards. Uh, and, uh, those rewards have gotten more generous, uh, uh, over time. And so, um, if you do have a card that does offer cash back rewards, as soon as, uh, the statement cycle ends, normally those, uh, those rewards are available. And so, uh, if they're available, take those as a statement credit, uh, so that you can, uh, uh, bring that balance down a little bit, uh, as you are spending. If you already have credit card debt, how do you pay it off ahead of the holidays? Well, I think that, uh, the main thing is, is that, uh, you need to pay, uh, make a conscious effort to set aside money to pay it off. Uh, so set aside a part of your paycheck to, uh, service that debt, uh, to make sure that you are paying that down on a regular basis so that we can avoid interest. And, uh, we don't necessarily get, dig ourselves into a deeper hole. With regard to the consumer mindset, we've heard a lot about the resilient consumer. How do you anticipate that that would show up within an environment that we just laid out where there is this record, record high level of debt that is being carried? Uh, and especially knowing the propensity to just tap, swipe, use a credit card during a season like this. I think that it's really easy to sort of fall into bad habits. And that is exactly what, what you're talking about. Um, you're talking about, that, uh, you know, we always spend this, uh, during the holiday season. I think that we have to realize that, uh, we have had a period of, especially over the last couple of years of elevated prices, and we just need to pay attention more this year, uh, maybe than we have in the past about how much things cost. And, uh, we need to be more price conscious and we need to be looking at what we're doing. Um, the only way that, uh, we're going to turn things around and the way that that credit card debt doesn't grow and get, uh, you know, kind of out of control is by staying within our budget. Are there ways that you can spend and budget that are actually tax beneficial? Once you get into kind of looking at your filings that you'll be needing to prepare at the end of this year for next tax season? Well, I mean, uh, so there are certain things, uh, certain types of spending that are deductible, uh, charitable contributions, uh, maybe one that's, uh, may come up, uh, when, uh, uh, in order to get that though, uh, you would actually have to spend the money towards, uh, towards the charity in order to take advantage of that tax deduction. So there certainly are some ways to do that primarily in the, uh, charitable contribution area. And just lastly, while we've got you, David, the, the pros and cons of course, have been explored for buy now pay later by many consumers and many consumers might lean into this if they're not able to just take the cash out and pay for something, or if they do need to finance over time, what are the pros and cons that you've seen among your clients and especially within your own consulting? Yeah. So, I mean, uh, buy now pay later. I mean, they, there's definitely been a rise in popularity of those products. Uh, the problem is, is that with buy now pay later is, is that, uh, people, uh, remind, uh, know about the buy now part, uh, but they forget about the pay later part, uh, where, uh, you know, the restiller on the hook, uh, for that debt, uh, going forward. And so, um, I do think that those, uh, that those strategies can work, uh, but, uh, we just got to remember that we are going to have to pay that debt down. And so we need to make room to pay for that debt, uh, in our budget and in our paycheck. I think as long as we do that, we are paying those balances off. Then I think that that can, that can work just fine. David Peters, Peters tax preparation and consulting founder. Thanks so much for taking the time here with us, David. Thank you for having me.