Stand Back--She’s Going to Charge!
The next salesclerk who asks me in that unnervingly cheery voice if I’ve finished my Christmas shopping yet is gonna get decked.
No, I have not finished my Christmas shopping yet. I have not even started my Christmas shopping yet.
I have a bunch of things marked in the Toys R Us circular. I have department store ads stacked up on my dresser. I have dog-eared the pages in a half-dozen catalogs from which I intend to order.
But with only 10 days to go until Christmas, I have not had time to actually buy anything yet.
About the only thing I’ve done to prepare for my annual Christmas shopping spree is the very worst thing I could have done. . . . I’ve got a handful of credit cards, with zero balances, ready to charge.
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It seemed like a good idea at the time. Offers for “pre-approved” new credit cards were rolling in faster than I could count them, touting their low, low annual percentage rates and the wisdom of shifting to them the balances from my nasty, high-interest cards.
I resisted for months, until I realized that my card balances were hovering dangerously close to my credit limit . . . and, for heaven’s sake, what if there were an emergency and I needed to charge a big amount quickly? And the new cards, with their lower interest rates, could save me hundreds in finance charges over the long haul.
So I said “Yes” and the new cards came rolling in.
Good plan, but I made one critical error. Transferring those balances left me with a new and irresistible lure--my old, empty cards, beckoning me each month with zero-balance monthly statements.
It was a situation tailor-made for disaster, especially for a woman whose outgo perpetually exceeds her income.
I found essentials to use them for, of course. A new floor in the family room, to replace that ratty carpet. A trip for the family to my brother’s wedding back East. A summer weekend with the kids at a pricey Santa Barbara resort.
And before I knew it, I had five credit cards with balances spiraling wildly out of control. Which meant it was time to order more cards. . . .
You can see where I’m going here. Transfer and charge, transfer and charge. . . . I was being victimized by my own internal pyramid game, trapped in a kind of credit-card quicksand.
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In finance industry parlance, I’d become a revolver--one of those hapless consumers who never pay their credit card balances in full, just make monthly payments and let the balance roll on into the next month.
It’s people like me who keep the credit card industry afloat, allowing them to offer to the rest of you those fantastic low-interest, no-annual-fee invitations to shop to your heart’s content.
Credit card companies make the lion’s share of their money through the finance charges we pay on month-to-month balances, and the nation’s debt load is increasing fast enough these days to allow them to make attractive pitches to new customers and still keep their profit levels high.
The holiday shopping season provides the year’s biggest bonanza for credit card companies--and the biggest hazard for confirmed revolvers like me, consultants say.
Credit counselors and bankruptcy lawyers do a booming business in the months after Christmas, thanks to those of us who spend more than we have on holiday gifts.
Bankruptcy filings are already at record levels--projected to surpass $1.3 million this year alone--and the vast majority are caused by overspending, not unemployment or sudden bad luck.
For consumers already struggling to manage their debts, Christmas can be their undoing.
Last year, nearly one-third of adults said they spent more than they planned to on holiday gifts, according to the National Foundation for Consumer Credit. And most of those shoppers had no idea how much they were spending until the bills began coming due.
And using credit cards seems to loosen the purse strings. When it comes to holiday shopping, credit card users spend 30% more than buyers who pay with cash, in part, counselors say, because you tend to evaluate your purchase more closely when you’re paying with hard-earned greenbacks.
There are several ways consumers can reduce the risk, counselors say: Make a list of gifts you plan to buy and stick to it. It’s those emotional, impulse buys that can push you over the financial brink. Budget a dollar amount for each person on your list and don’t exceed it. Pay by cash or check whenever you can.
And my personal favorite: Spread your holiday shopping over the entire year, so you’re not forced to rely on nonexistent cash reserves.
I used to do this all the time. Then I’d hide the presents so my children wouldn’t find them . . . and I’d forget all about them by the time Christmas came.
If I could only treat my credit cards that way.
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Sandy Banks’ column is published Mondays and Fridays. Her e-mail address is sandy.banks@latimes.com.
