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Avoiding the Christmas credit crunch
Pulling the plastic too much at holidays can bloat debt
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Many consumers will use credit cards for their holiday purchases, but financial experts offer a warning: Charging items with high-interest cards can be costly and add to personal debt. - photo by Tom Reed

The sign in the store tells you that it is "The Biggest Sale of the Season," with discounts of 50 percent or more.

But if you charge it with a credit card with an interest rate of 20 percent or higher, the bargain may not be quite as big.

The average consumer is likely to spend $923.36 this holiday season, according to the National Retail Federation. However, going out of the holidays saddled with additional debt can make the situation less than merry.

"We suggest that people prepare a budget before they begin shopping," said John McCosh of Consumer Credit Counseling Service of Greater Atlanta, which has an office in Gainesville. "They should list who they're going to buy for and attach a dollar figure to each name and determine how they're going to come up with that total."

If the total is unrealistic, McCosh says a person should rethink spending that much.

Pulling out a credit card without the ability to pay it off promptly means that what is a bargain at the checkout may not be such a deal 90 or 120 days later.

"People are seeing interest rates on cards go up," McCosh said.

CCCS, which offers a number of debt management options, has a program for people who are in over their head in credit card bills.

"We're hearing from people who have been pushed over the edge," McCosh said. "They've been paying the minimum payment on time but the credit card company has determined that they are risky. We have examples of where a card has gone from a promotional interest rate of 4.9 percent to a new rate of 28 percent."

The agency offers a debt management plan where CCCS negotiates with credit card companies and other credit on interest rates. The consumer makes a monthly payment to CCCS, which then pays the creditors.

"The incentive for the credit card companies is they have some assurance they are going to get paid on time every month," he said.

Beyond budgetary counseling and repositioning of debt, one of few remaining alternatives is bankruptcy.
Statistics from the U.S. Bankruptcy Court for the Northern District of Georgia, showed the Gainesville division had a 13 percent increase in bankruptcy filings through October.

In the first 10 months of 2008, there were 3,166 bankruptcy filings compared with 2,780 in the same period of 2007.

McCosh said the number of people seeking various debt relief services from CCCS has increased dramatically.

"In foreclosure prevention, we counseled 30,000 people last year and we expect more than 60,000 this year," he said. "It's up across the board, but most significantly in foreclosure prevention."

The agency suggests avoiding using credit cards to make holiday purchases, especially if you are not able to pay the balance in full at the end of the month. They say the easy way to avoid temptation is to leave your credit cards at home when you go shopping.

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