11/07/2010

The Cost of Holiday Credit

With holiday sales beginning for the 2010 season, you will likely see offers for discounts if you use your store credit cards.  Retailers are very aware of studies that indicate that if you are swiping plastic for your purchases, you are likely to spend on average 10% more than if you paid with cash.  Credit cards can provide convenience for shoppers, but buyer beware: unless you are disciplined in repayment, these card purchases can cost you more in the long run than any discount you may have received.

Using a cool calculator we found on bankrate.com http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx  that calculates both the interest paid and the total length of credit card debt, we found that by inputting the average family holiday credit of $500, that if I make the minimum payment on these purchases, I will be in debt for over four years and pay as much as $450 in interest.  That increases the total cost of my holiday from $500 to up to $950!

Because of the new credit card laws that were inacted in 2010, you can easily see the cost of making minimum payments.  One way you can avoid the debt trap during the holiday season is to check out Virginia Saves new Holiday Treasure Kit.  This is a compilation of great ideas for saving on food, decorations and giving during the holidays.  Also, there are great tools for getting greater financial control into 2011.  You can get your Holiday Treasure Kit by visiting http://www.virginiasaves.org/.  While there, sign up to become a saver for great savings and debt reduction strategies throughout the year. 

Don't be a victim, but be a victor as you establish solid financial strategies that will sustain you all year long.

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