Holiday Shopping Will Add To Debt

ROCKVILLE, MD. — Americans plan to spend 45 percent more on holiday shopping than they did last year, according to the Second Annual Holiday Survey by Myvesta.org, formerly Debt Counselors of America.

The average holiday shopper will spend $1,220 in 2000, up from $841 in 1999. One in ten shoppers will spend more than $1,500. In addition, Americans’ credit card balances have increased by 60 percent.

Myvesta.org’s nationwide telephone survey asked 1,000 respondents how much debt they carry on all of their credit cards, including major bank, retail, gas, and other cards. Americans’ average credit card debt increased from $1,751 in 1999 to $2,814 in 2000.

“People’s appetite for credit made a big leap forward in the past year,” said Mike Kidwell, vice president and co-founder of the nonprofit Myvesta.org. “It’s not surprising after another year of economic enthusiasm. Until we experience a major economic downturn, people will continue to push their credit limits to the sky.”

Mr Kidwell added, “If consumers use their credit cards to pay for those holiday purchases, the average total credit card debt in January will jump to more than $4,000. Assuming that people make only the 2 percent minimum payment, it will take 38 years to pay off the debt and the interest payments will top $9,000.” This calculation uses today’s 18 percent average credit card interest rate.

“The holiday lesson is clear,” Mr Kidwell said. “Charge only what you can pay back in three months or less.” By repaying the $4,000 debt in three months, the person would pay only about $120 in total interest.

Myvesta.org offers the following credit tips for a happy holiday season and an even happier New Year:

Carry only two cards when shopping. Use one with a zero balance for purchases you will pay off in full. Use the other, low-interest-rate card for purchases you will pay off over time.

Record all of your purchases in your checkbook register. Even if you don’t write a check, subtract the amount of the purchase. That way, when the bill arrives, the money will be in your checking account to pay the bill in full.

Avoid “skip payment” offers that cause you to pay more interest and face larger bills.

Avoid “buy now and pay later” offers, which encourage you to spend money you don’t have.

Use a low-rate, major credit card instead of high-rate department store cards.