Holidays
Plan yous spending for the holidays to avoid credit-card madness
Banking Columnist Sun-Sentinel
Posted November 17 2003
FORT LAUDERDALE, FL -- It's up to you. This holiday season, either you buckle down and control your credit card spending by establishing a master plan for the gifts you buy, or you're going to wind up over your head in debt when the bills roll in after Jan. 1.
It's no secret that Americans are already suffering under a monstrous debt load, and Christmas splurging is only going to worsen the picture. The average Joe carries more than $8,900 worth of credit card debt, while the typical household has a total of 16.9 credit cards. And when you buy Aunt Nellie the new furniture she wants, you go deeper in the hole.
A study by Consolidated Credit Counseling Services shows that 54 percent of consumers are still paying off debt from the last holiday season. Yet, economists predict that shoppers will increase their holiday spending by 6.3 percent this year. The name of the game is to skip the cards this yuletide and use cash, for what you can afford to buy.
I asked several knowledgeable credit and debt experts around the United States to identify the biggest mistakes consumers make when they plunge into holiday shopping.
"Too many sign up for store credit cards, including the ones that promise 10 percent off their merchandise," says April Lewis-Parks, director of education for Consolidated Credit Counseling 800-320-9929. "Most of them don't pay off these cards on time -- and usually the store cards charge 22 percent interest rates, even with the 10 percent off. Plus, people charge on multiple cards and lose track of what they spend. They wait until the last minute to shop, become frustrated and under the gun, so they overspend".
"Most important, money doesn't buy happiness, and the bigger the gift doesn't necessarily mean the better the holiday."
Americans often jump into Christmas spending without having a plan or making a list, adds Paul Richard, executive director of the Institute for Consumer Financial Education 619-239-1401. "They need guidelines on how much they're going to spend per individual, and too many of them take all their credit cards along when they shop. This leads to impulse buying without making any comparisons. You've got to plan your gift-giving in advance, knowing who you're buying for, the potential gifts and the dollar amounts."
John Gormley, president of Consumer Credit Management Services 800-590-3328, also thinks the most common mistake people make is failing to create a budget or a list to control expenses. "Instead, they buy on impulse when they really need a game plan, it's like a kid in a candy store -- with pretty music, all the smells -- and they end up overspending."
Ideally, says Todd Ossenfort, president of Pioneer Credit and Debt Consolidation in Rapid City, S.D., 800-888-1596 consumers should start planning their budgeting every January -- 11 months before the holiday season begins. "Most don't do it because it's hard to budget and stick to it."
There are lots of holiday shopping tips floating around, but these seem to be among the most critical:
Make a plan with a list and dollar amounts you can really afford.
Use cash instead of plastic. If you must use credit cards, choose only the one or two with the lowest interest rates -- no more. Don't be misled by your cards' spending limits.
Keep track of what you're spending.
