Holiday debt hangovers are real but there is a simple way to avoid them

ATLANTA — Paying for your holiday presents with credit cards might be convenient but Channel 2 consumer adviser Clark Howard warns the convenience comes at a cost.

Howard said store credit cards can be especially tempting.

“When you are out Christmas shopping, they are going to throw credit at you everywhere you go online and in person. but there’s reasons you got to say no,” Howard said.

Howard said high interest rates on store credit cards could triple the cost of purchases.

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Gwinnett County resident Sami Johnson became hooked on store credit cards as a teenager.

“I was 23 years old with $25,000 of credit card debt,” Johnson said.

As an employee at a retailer, she even pitched them to customers.

“Not one point did I mention to them about an interest rate,” Johnson said.

She told Channel 2 Action News that she focused on the up front 20% savings.

“They didn’t care if they’re getting charged 29% on $25,” Johnson said.

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Johnson said the interest rates caused her bills to snowball and she realized she was in over her head.

“I’m paying out 25 different bills. What am I doing?” Johnson said.

The average credit card interest rates is 22.76% for new credit cards, according to Wallethub.

Kate Bulger is the Vice President of Business Development at Money Management International. MMI helps consumers get control of debt.

She told Channel 2 Action News that consumers need to set a holiday budget to avoid huge bills in the new year.

“In January, as those first credit card statements come in, that’s when we really start getting calls,” Bulger said.

Even though people are making the same payment each month, the balance continues to grow because of the high interest.

Johnson signed up with MMI to tackle her debt.

“I had about 15 or 16 different store cards. So, I’d say half of them were able to settle. Half of them got the interest rates cut off,” she told Channel 2 Action News.

Even though a few companies required her to pay the balance is full, Johnson said she did it.

She sacrificed spending on fun things like eating out and managed to pay off her $25,000 debt in five years.

Bulger said on average, credit scores increase by over 82 points.

“Which is an incredible amount. And for a lot of clients, about one in five consumers who are renting, end up purchasing a home because they were able to pay off their credit card debt through a debt management plan,” Bulger said.

She said there is hope if consumers get the right people in their corner.

Howard said the best way to avoid a pile of debt is just saying no at the register.

“Don’t fall for it. I don’t care if they say wouldn’t you like to save 15% today. The answer is no I don’t. I don’t want more debt,” Howard said.

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