Inflation Is 2.3%, But Stuff Is Still Expensive. Is a Loan the Move This Holiday Season? | Global News Avenue

The pace of inflation has slowed over the past two years or so, with the latest inflation rates showing only rising prices Growth in October was 2.3% Since last year. That’s based on the personal consumption expenditures (PCE) index, the Fed’s preferred inflation gauge. This was a slight increase from 2.1% in September. Earlier this month, consumer price index (CPI) data for October showed that prices of consumer goods and services rose 2.6% year-on-year. Both inflation rates are close to the Fed’s 2% target.

If you’re shopping for gifts this holiday weekend and find the prices are still more expensive than you can afford, you might want a loanuse a buy now, pay later company, or even open a new credit card. While each method has its advantages, it is also important to understand the costs and risks associated with each method.

Popular gifts are getting more expensive

The popular board game Ticket to Ride had a suggested retail price of $39.95 when it was first released 20 years ago. Right now, it’s listed at $54.99, but you can often find discounts.

Or, if you’re looking for a high-priced holiday gift, the recently released PlayStation 5 Pro is on sale for $699.99. Comparing the prices of electronics can be tricky because changes in technology can affect prices. But consider this: According to a report from video game website GameRant, the PlayStation 5 Pro costs $200 more than the PlayStation 5 that launched in 2020. By comparison, the price increase from the 2013 PlayStation 4 to the 2016 PlayStation 4 Pro was just $50.

While it’s difficult to draw a straight line between past and present prices (holiday deals, for example, can cause price changes), overall you can expect to spend more on holiday gifts this year than in previous years, especially if you want to keep If nothing changes. See what others in your circles are spending.

According to the National Retail Federation, U.S. consumers are expected to spend a record $902 on seasonal items such as gifts, food and decorations during the winter holidays.

But what if you don’t have that much disposable income? Should you borrow money for the winter?

Is a loan a good idea to pay for gifts this season?

loan It can seem tempting to pay for holiday gifts, especially if you’re planning a New Year’s resolution, such as cutting back on spending to pay off a loan quickly. However, loans can be expensive and risky.

“It’s natural to want to have a joyous season, buy gifts for your family and make the most of it,” said Play Louder founder and CEO Joe DiSanto. “However, the reality is , taking on debt – whether through a personal loan, credit card or buy now, pay later – is generally not advisable. If you’re in a position where you need to take on debt in order to pay for your holiday, it could mean more. Big financial problem.”

If you don’t have the money to buy a gift right now and you take out a loan and can’t pay it off quickly, you could incur hefty interest payments. For example, average personal loan interest rates According to interest rate data analyzed by Investopedia, the interest rate in October was 26.11%. If you take out $1,000 for 12 months personal loan At this rate, you’ll pay an additional $147 in interest if you make regular monthly payments.

Credit cards aren’t much better. Median annual percentage rate According to the Investopedia credit card database, the ratio was 24.62% in October. Even if you put your gift on a credit card with a low or 0% introductory interest rate, there’s still a risk that you won’t have the cash flow to repay it before the interest rate rises.

Buy now, pay later (BNPL) is another option that typically breaks the purchase into smaller monthly payments and charges no interest if paid on time. In fact, according to a survey by financial app Cleo, 48% of young people are considering using BNPL more to buy holiday gifts this year.

If you miss a BNPL payment, you may incur late fees and damage to your credit score, so you want to choose this option carefully. For example, if you lose your job in the new year, you may have difficulty paying your BNPL payments.

Overall, it can be tempting to take out any form of financing to pay for holiday gifts, but it’s best to stick with what you can afford now.

“In some cases, this may make sense, such as if you recently lost your job but have a new position in the new year,” DiSanto said. “In this case, knowing that you can work in three To pay off the debt within six years a few months of financing might make more sense to avoid missing out on the holiday experience, but if It happens repeatedly that your income is not enough to easily cover your vacation expenses, and it is unlikely that your income will suddenly increase enough to cover these expenses in the next few months. Financing holiday gifts is not a sustainable solution.”