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Watch your holiday credit card spending!
FIGHT BACK! BY DAVID HOROWITZ
Now that we're into the countdown phase of the Christmas shopping season, it's time to
think about how we're going to pay for those holiday gifts. This is not going to be one of those
tear-up-the-cards-and-pay-cash ha-rangues. I'm not against using credit cards for seasonal gift
purchases -- within reason. What's "reasonable" depends, of course, on how much you already
owe and how quickly you can pay off the balance after the holidays. If your cards are already
maxed-out, you really have no decisions to make. Even if you're offered a new card or a higher
credit limit, getting yourself deeper in debt is a bad idea -- period! But if you're closer to thenational aver-age, then you may have as many as nine credit cards, three of which are
multi-purpose bank cards like Visa, MasterCard or Discover. And if your accounts are paid up or
have minimal balances owing, then it's tempting to run up more debt this time of year. Again,
that's OK if you have a realistic plan for paying it off.
The first thing you should consider is how much you can afford to spend. For couples, this eans agreeing on spending limits, especially for each other and the children -- the people we
tend to spend the most money on. Single people may want to make a list and assign limits to
each person on that list. The goal is to spend no more than you can pay off in six months. Forget
the minimum amount due each month. If you don't pay off more than that each month, you will
never get rid of that credit card balance.
Choose which cards you want to use. Major department stores recently raised their credit
card interest rates signif-icantly, some to 21 percent or more. You may be better off using a bank card for your purchases unless they are small enough to pay off completely when the bill
arrives.
You should know what interest rates your bank cards are charging. Again, unless you plan
to pay them off immedi-ately, use the card with the lowest interest rate. You'll find the interest rate listed on your last monthly statement. You may also want to consider incentive programs
offered by some cards, such as discounts, cash rebates, frequent flyer miles, free gasoline, and
the like. Stick to one card if possible. Even minimum payments on several different accounts will
add up to more than a single monthly payment on one account.
If you do find yourself over your head in credit card debt, try to find a lower interest de
consolidation loan to pay off those accounts. If you can get a home equity loan, so much the
better. Loans secured by the equity in your home carry lower interest rates and the interest is
generally tax deductible. Is it really that easy? No! New loans, especially those involving real
estate, cost money to arrange. Spreading short term debt over a much longer term is very costly
when you consider the total amount of interest you will end up paying. There's also the danger
that with your credit cards paid up, you'll go right back out and run them up again.
If overspending is the real problem, then get some guid-ance from a non-profit consumer
credit counseling service before you go shopping this year. They'll help you put some realistic
and manageable limits on your Christmas spending.
If you have any questions or comments, please write to David Horowitz in the Consumer
Forum+ (go FIGHTBACK). COPYRIGHT 1994 CREATORS SYNDICATE, INC.
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