N E W Y O R K, March 7, 2001 -- If you're still paying off Christmas debts, it's time to take a hard look at how you're using your credit cards.
You won't be alone. Consumer counseling agencies see a 25percent increase in the number of people seeking help in Januaryand February, and most of that traffic is propelled to their doorsby holiday bills that haunt consumers like the ghost of Christmaspast.
"A lot of people get by, paying the minimums on their creditcards," said Durant Abernethy, president of the NationalFoundation for Credit Counseling. "Add on the holiday bills andall of a sudden, those minimums are more than they can afford."
You obviously can't go back and undo your Christmas spending.But you can learn from it.
"People in trouble generally don't have a good idea of how muchthey spend," said Abernethy, whose group is the umbrella for thenonprofit Consumer Credit Counseling Service agencies around thecountry.
He emphasizes the importance of budgeting and planning ahead,saying: "If you need to use a credit card to reach a goal, youshould be able to pay it off in no more than 90 days — and,preferably, in 30 to 60 days."
Robert Manning, a senior research fellow at the University ofHouston and author of "Credit Card Nation — The Consequences ofAmerica's Addiction to Credit," believes part of the problem isthat the nation's ethic has changed.
"Our parents viewed debt as a shame and accumulating a nest eggas the right thing to do," Manning said. "The young see that as'old school' and have been convinced that going into debt isfine."
Industry of Debt
The result, he said, is that while 40 percent of credit cardusers pay their bills in full each month, the remaining 60 percentroll them over — and over and over. He calculates the averagebalance of these "revolvers" at more than $11,500.
"The debt industry — and it is an industry — has persuadedpeople that their 'wants' are 'needs' and that if you really carefor someone, you'll spend more money on them," Manning said."They tell you it's so easy, just use plastic. But they don't tellyou how it will hurt, in mounting debt and higher interest ratesand higher fees."
You can figure out just how much your Christmas debt is costingyou to carry by using calculators on the Internet. Plug in $1,000at 17 percent (the prevailing credit card rate) in the calculatorat www.bankrate.com, and you'll find that your interest totals $94over one year and $187 over two.
Nancy Dunnan, author of "How to Invest $50 to $5,000,"recommends that the way to begin getting a handle on credit carddebt is to make a list of all your unpaid balances along with thecorresponding interest rate, "then start paying down the card withthe highest rate first."
If your problem is mainly holiday bills, "it shouldn't bedifficult to figure out some ways to gather up a little extracash" by eating out less, taking a lunch to work, doing withoutcappuccino for a while, even getting a weekend job, she said.
"And use this as a heads-up for next season," Dunnan said."Figure out what you spent last year and try to put aside somemoney each month so you'll accumulate that amount by nextChristmas."
She adds: "If it's more than you can afford to set aside, thenmaybe you need to cut back on Christmas spending next year.Certainly friends and relatives don't want you to go into debt forthe holidays."