Don’t Take on More Credit Just to Get Through the Holidays

The "holiday credit hangover" is an expensive tradition and may be worse than ever in 2005 due to the waning economy, increased fuel prices and job lay-offs.

(PRWEB) December 12, 2005 -- Consumer debt is at an all time high and you have to wonder how much of holiday expenses are going to wind up on credit cards. Many could be headed for a debt trap when you consider that a $3,000 credit card debt with an annual interest rate of 16.9% means the cardholder is paying $507 a year for interest alone.

Many people are still paying off their credit cards from last Christmas. Only 35 percent of American credit card holders pay off their balances in full each month.

“Many factors contribute to overspending during the holidays. Lacking a clear picture of income and expenses leads consumers to not know how much they should spend. Some people think that if they spend a lot for gifts the recipients will appreciate it more. Others spend more than they can afford with the belief that they will be receiving salary increase so they can pay their debts off.” says Howard Dvorkin, author of Credit Hell: how to dig out of debt and founder of Consolidated Credit Counseling Services, Inc.

Use the following shopping strategies to stay debt free this holiday.

- Pay with cash or try carrying only one credit card to consolidate your spending. Using several cards simultaneously can make it difficult to keep track of your spending.
- Think before using your credit card to take advantage of holiday "bargains." Comparison-shop, particularly for large ticket items. It's good to take advantage of these opportunities, but always ask yourself, "Would I buy this if it weren't on sale?"
- Think about what you're charging -- it might be better to pay cash for those smaller purchases. Stocking stuffers can add up quickly, impacting your next statement's "New Balance" column.
- Credit card issuers give you a line of credit based on information available to them about your financial situation, but you are the best judge of what you can comfortably manage. Just because you have a certain amount of credit available, doesn't mean you should use all of it between Thanksgiving and New Years.
- Take a look at your credit situation and determine if you can comfortably take on more credit card debt. As a rule of thumb, your total installment debt (e.g., credit cards, auto loans, student loans) shouldn’t exceed 10 percent of your annual take-home pay.

Most creditworthy people have as many credit cards as they can possibly use. Banks are expanding their portfolios by finding customers in overlooked corners of the marketplace - like people who are over-extended.

These offers can be very dangerous to people with bad credit or a high debt to income ratio. It is important to realize you can not get out of debt by taking on new debts or robbing “Peter to Pay Paul”. Individuals in this situation should consider seeking the advice of a non-profit credit counselor by calling 1-800-SAVE-ME-2 (1-800-728-3632)or visiting www.consolidatedcredit.org.

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