Christmas season is a time of year where logic is often thrown out with the piles of gift wrap left under the tree. You may find it hard to say no to expensive gifts for your children or shorten the list of friends and co-workers you want to acknowledge with a little “something” this year. However, if you’re using credit cards to spread holiday cheer, you should know what it’s really costing you.According to the United States Federal Reserve, with monthly payments of $200, it will take you 54 years to pay off $10,000 in credit card debt at an interest rate of 19 percent. During that time, you will pay $35,198 in interest on your $10,000 balance.
When you look at the numbers, it’s not difficult to see that carrying a balance on credit cards might be the worst thing you can do with your hard-earned money no matter what time of year it is.
When Credit Card Spending Gets Out of Control:
Getting in over your head with credit card debt doesn’t mean you’re a bad person or even an irresponsible one. It happens to millions of people because banks make paying with plastic too easy. But the banks also rig the game. Have another look at the Federal Reserve credit card calculations above if you need extra jolt.
A lot of people feel guilty when they come up short at the end of the month and there is just not enough money left over to pay credit card bills.Here is the first hump you need to get over. Don’t feel guilty. The banks that are happy to harass you for money the minute you miss a credit card payment are the same banks that have been taking enormous interest payments from you over the years.
The second hump is reminding yourself that you don’t have to, nor should you, surrender your life savings to a credit card company, especially if it is coming out of a retirement account.Credit card debt is unsecured and most retirement accounts are legally protected from creditors. So no matter how much they try to intimidate you, (and they will) there is no reason to let them trick you into giving them money from your IRA.
There are different options for people who wake up month after Christmas and realize that this was the year their holiday generosity took them too far.Negotiating with the creditor for lower monthly payments might stave off default, but it could also cost you more in higher interest payments. Credit counselors can negotiate reduced principal, lower monthly payments, or even a lower interest rate. But they will do it for a fee and many of these companies are not reputable. So if you decide to go the credit counselor route, be sure to research the company thoroughly before signing up.
As a last resort, bankruptcy may be an option. Finding a reputable bankruptcy attorney will also require time and effort, but will be well worth it in the long run.If your credit card debt gets out of control due to addictive or compulsive behavior, you can visit Shopaholics Anonymous for help.It might be a stretch to think that too much Christmas shopping can lead to personal financial disaster, but it does happen. The best way to make sure it doesn’t happen to you is to use cash, get professional help if you need it, and set an example for your family and friends by showing them that everything in life has limits, including what you can spend on their Christmas presents.