Riverside, CA (PRWEB) August 22, 2008
As back-to-school expenses continue to rise, many consumers may be reaching for their credit cards to buy necessary supplies for their kids.
That's the concern of Springboard Nonprofit Consumer Credit Management, which offers cautionary advice to those who plan to pay with plastic when faced with educational expenses.
"It's not just pencils and books," Springboard Vice President of Community Outreach Melinda Opperman said. "Shoes and apparel make up the largest percentage of school shopping, and that's where consumers feel most comfortable paying with credit."
But they shouldn't get too comfortable swiping that card, Opperman warns. "With holiday shopping just around the corner, this is a bad time to add to one's consumer debt. Parents need to have a plan to pay off those school expenses before the holiday gift-giving season hits."
It's not just this year's holiday spending that may be affected by back-to-school shopping. If one pays for educational expenses with credit, that debt can end up hanging around for years. According to the National Retail Federation, the typical family will spend around $560.00 on back-to-school expenses this year. With a 2.5% minimum monthly payment, and 19.99% APR that balance could take almost 9 years to pay off. And over that time period, a cardholder could pay more interest than the original debt!
Amount Charged: $560
Annual Percentage Rate (APR): 19.99%
Minimum payment: 2.5%
Time to pay off: 104 months
Interest paid: $584
This example doesn't even include imminent holiday shopping, which could make these numbers even scarier.
"The best policy is to pay for back-to-school purchases with cash," Opperman said. "If you must pay with a credit card, have a plan in place to pay that card off in full as soon as you receive a statement."
"If you are unable to pay it in full, keep in mind monthly credit card payments are calculated as the percent of your current outstanding balance. The monthly payment called for on your credit card statement will decrease as your balance is paid down and only paying the minimum called for on the statement can greatly increase the length of time and amount of interest you pay," said Opperman. "Additionally, the length of time to pay off a credit card is greater the higher the interest rate, and keep in mind any low promotional interest rates that are only good for a short period," she said.
If you're concerned about how your spending will impact your personal finances, visit Springboard's website at http://www.credit.org for helpful financial tools, calculators and budget worksheets found in Springboard's Power of Paycheck Planning booklet that you may download for free. To receive a copy of the booklet by mail or for free personal credit education and financial counseling, dial (800) 947-3752, or go online to http://www.credit.org.
Springboard Nonprofit Consumer Credit Management 4351 Latham Street, Riverside, CA 92501
About Springboard: Springboard is a nonprofit consumer credit education and financial counseling organization founded in 1974. The agency offers personal financial education and assistance with money, credit and debt management through confidential counseling. Springboard is accredited by the Council on Accreditation, signifying high standards for agency governance, fiscal integrity, counselor certification and service delivery policies. Springboard is a HUD approved housing counseling agency and a member of the National Foundation for Credit Counseling, a national organization of nonprofit credit counseling agencies. The agency provides pre-bankruptcy counseling and debtor education as mandated by the bankruptcy reform law. The agency has several locations in California and offers face-to-face and nationwide phone counseling services. For more information on Springboard, call 1-800 WISE PLAN (1-800-947-3752) ext. 7888 or visit their web site at http://www.credit.org.