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Howard University Experts Share Cautions on Credit Card Spending Over The Holidays

Washington, D.C., Dec. 12, 2023 (GLOBE NEWSWIRE) -- Howard University experts are providing Black families and other Americans with tips on how to be mindful about holiday spending this year, noting higher interest rates and student loan debt payments that have restarted for the first time in more than three years. For consumers dreaming of generational wealth and home ownership, Howard experts say a focus on increasing savings and minimizing credit card spending can create a better financial picture, especially as they prepare for the upcoming tax season.  

Studies indicate that Black buying power will jump to $1.8 trillion in 2024. While surveys show that about 80% of Black spending revolves around essentials such as rent, food, commuting to and from work, and healthcare, competition for the other 20% of the Black consumer dollar is fierce. Experts say consumers should be aware of certain dangers ahead of their spending decisions, especially if planning toward bigger purchases like buying a home. 

“Swiping that credit card will come with added expenses later,” says Gerald Daniels, Ph.D., associate professor of economics at Howard University. Daniels’ research focuses on macroeconomics and consumer finances, Black family finances, as well as student debt related issues.  

Given the relatively high interest rate environment, the Howard economist says families might be better off if dinner-table discussions this holiday season focus on saving money, not spending it.  

Consumers need to stay attentive to credit card spending 

The Black population has an outsized proportion of consumer spending habits compared to its proportion of the population, says Curtis Kidd Telemaque, Ph.D., director of the HPS Center for Financial Excellencein the Howard University School of Business. African American and Hispanic consumers spend more than other consumers during the holidays than any other time of the year. Multicultural consumers plan to spend over $500 each this holiday season on gifts for family members and friends, with overall consumers set to spend more than $100 billion.  

In general, consumers using credit to purchase gifts must take the time to understand interest, APR, and inflation, Kidd says. These factors can significantly boost the dollar amount that buyers will have to pay back, even more so today than in recent years.  

“It’s important to consider these factors before making a purchase decision using credit because it could be that instead of paying just 20% in interest, you are paying an additional 40% when accounting for inflation,” Kidd says.  

Kidd says the other option would be to not use a credit card, although he acknowledges that depending on an individual’s financial position, that may not be possible.  

Daniels says that nowadays, there are a number of innovative saving methods. “You can buy bonds. You can get high interest rate savings accounts. All of these things are going to give you additional access to homeownership, even considering the fact that interest rates are very high,” Daniels says. 

Like Daniels, Kidd recommends that consumers find a checking or savings account that provides some level of interest over and above the current rate of inflation. 

Kidd says there isn’t much that consumers can do about high inflation other than make necessary adjustments, an important one being extra vigilance about credit card rates during the holiday shopping season.  

“Inflation is a macroeconomic trend that the whole country has to endure,” Kidd says. “My advice is to be cognizant of this. If you put money into a checking account, you have to know that next week, due to inflation your dollar is actually worth less.” 

Prepare for tax season 

Considering current economic turbulence, it is especially important for consumers to start preparing ahead of time for the upcoming tax season. Consumers should be planning to make investments and purchases that will maximize their refund and minimize their taxable income. 

Jean Wells, Ph.D., associate professor of accounting and business law, echoes warnings about rising interest rates on popular high-value purchases.  

“Consumers should delay purchasing items that currently carry high interest rates including homes and cars; the home mortgage interest rates exceed seven percent and car loan interest rates are at least five percent,” she says. 

Consumers can consider the following investments to increase their tax refund:  

  • Qualified electric vehicles. The maximum federal income tax credit is $7,500.  
  • Solar panels for their homes. The federal income tax credit is 30% of the installation costs. 
  • Qualified home improvements that qualify for the federal home energy tax credit which is 30% of the costs up to a lifetime maximum of $500. Qualified home improvements include purchasing and installing new windows, skylights, insulation materials, water heaters, boilers, heat pumps and other qualified purchases. 

Consumers who itemize their deductions can consider making the following payments to reduce their taxable income and, ultimately, their tax liability: 

  • Charitable donations to churches, universities, and other charitable organizations.  
  • Homeowners should consider making an extra mortgage payment in 2023, i.e., paying the January 2024 mortgage early by December 31, 2023, so that the interest payment for January can be deducted in 2023, thereby increasing their itemized deductions and reducing their taxable income and tax liability. 

Don’t forget to account for student loan payments 

With federal student loan payments resuming, Daniels expects student loan repayment to be a drag on holiday spending this year. According to the U.S. Department of Education, 72% of Black students go into debt to finance their education compared to 56% of white students, and women of color are 20% more likely to have student loan debt than majority men.   

High levels of student debt can make it harder to buy a house or become a career entrepreneur. Daniels stresses the following tips for consumers with student loans.  

  • If you have student loan payments that have restarted, make sure to account for those when considering your budget for holiday spending. 
  • It is important to complete degree programs that families have paid for through loans, while maintaining a focus on saving for loan repayment. Higher education is an avenue to future wealth so when taking out loans to pay for education, it is important to finish what you’ve started. 
  • The negative impact of missing student loan payments can be far-reaching. Missed payments of 60 days or more could end up on your credit report and your credit score will take a hit. While filing for bankruptcy on student loan debt is possible, it isn’t common, and the process is difficult. 


Contact to connect with Howard University experts on these holiday spending tips and more. 


Sholnn freeman
Howard University