Resist buying that $500 fl at panel television with all the bells and whistles, if you’re going to charge it to a credit card.
It will help avoid the holiday spending hangover.
“Relying less on credit for holiday purchases will help consumers feel more comfortable about their personal finances again and maymake them more willing to spend in the future,” Phil Rist, executive vice president of strategic initiatives for BIGResearch, said in a Wednesday report.
Credit Counseling of Arkansas, with off ces in Bentonville, Fayetteville, Springdale and Siloam Springs, usually sees by the end of January clients who overspent at Christmas, said Mark Foster, Credit Counseling’s education director.
The bills for December spending don’t usually arrive in mailboxes until the 10th, 15th or later in January, Foster said. That’s when people realize the gifts they charged accrued interest and see their spending totals, he said.
Tony Bradford knows firsthand how credit card debt consumes time and income. He is Credit Counseling’s client of the year.
Bradford, 39, of Fayetteville, was more than $10,000 in debt in 2004, according to credit counselors. He tried dealing with credit card companies on his own, but is deaf, said Kathee Harper, the credit counselor who handled Bradford’s case.
“He was frustrated. His accounts were being bounced back and forth among collection agencies. And I had to work hard to make sure we understood each other,” Harper said.
She negotiated with creditors to reduce interest rates and worked with Bradford on a debt payment plan. He paid about $250 per month on credit cards at first and, in his last year working with credit counselors, paid about $160 monthly, Harper said. Bradford was out of debt in fi ve years and looking to the future.
“He has started a savings account and has a goal of purchasing ahome,” Harper said.
She plans to check on Bradford in February or March to see if he wants to attend home buyer seminars and learn about the federal tax credit, to help him achieve his home ownership dream.
Bradford didn’t respond to an interview request.
Though holiday spending might not get people in as severe a situation as Bradford’s, that great deal at a holiday sales price might wind up lingering on a credit card bill for years.
Consider that the charged amount includes more than the item price: It also includes sales tax, about 9 percent in Northwest Arkansas, and credit card interest.
A credit card payment calculator on the Federal Trade Commission Web site indicates it would take about four years to pay off a $550 credit card charge, if the debtor paid the minimum $28 per month at 24.99 percent interest.
The consumer would pay $271 in interest on that $500 television, more than half the initial cost.
The temptation to put Christmas gifts on plastic is likely to be great in the next week, as most people haven’t fi nished shopping.
About 46.7 percent of people completed their shopping in the first half of December, the National Retail Federation reported Wednesday, a little lessthan the 47.1 percent of shoppers who finished buying holiday gifts in the first half of December 2008.
BIGResearch surveyed 9,929 people from Dec. 1-9.
The survey has a margin of error of plus or minus 1 percent.
The survey indicated about 39.3 percent of shoppers use either debit or credit cards most often forholiday spending.
However, 30.9 percent of people said credit cards are the preferred payment method, down from 33.8 percent who preferred credit cards during the 2008 holidays.
Consumers will cut back on credit card spending next year, according to a Wednesday report from Todd Hale, senior vice president of consumer and shopper insights with The Nielsen Co.
Nielsen research indicated almost 30 percent of consumers said they will use credit less and 19 percent of those surveyed expect to save more money next year. The report did not give the data on how many people were surveyed or when the survey was conducted.
It’s not just credit cards that get people in trouble, Foster said. Some may overspend with cash or debit cards, eating into money available to pay for necessities. He suggested people shop with lists and make budgets ahead of time to avoid holiday spending hangovers.
Spending less may benefi t the psyche as well as the pocketbook.
About 7 1 percent of Americans report money is a significant source of stress, according to the American Psychological Association’sStress in America survey released Nov. 24.
“The holiday season can bring with it additional emotional and financial stressors that can negatively impact both physical and mental health,” Dr. Katherine Nordal, the association’s executive director for professional practice, said in a news release.
Debt stresses just don’t aff ect adults.
About 30 percent of children worry about the family having enough money, according to the association’s survey, while 18 percent of parents report fi nances stress their children.
Harris Interactive conducted the online survey for the psychological association from July 21 and Aug. 4. The survey included 1,568 American adults. Survey results also included a Youth-Quake survey conducted Aug. 19-27 with 1,206 youth who were 8 years old to 17 years old.
People can deal with financial stress by dialing back expenses and remembering what’s important at the holidays, according to the psychological association.
“Remind yourself that family, friends and the relationships in our lives are what matter most,” the association’s November report stated.
Business, Pages 23 on 12/20/2009