Don’t Let Black Friday Lead To January Blues

Americans  can  be  generous  – to  a  fault  - and  never  is  that  character  trait  more  evident  than  during  the  holiday  shopping

 season.   

At  this  time  of  year,  millions  of  people

 put  their  financial  common  sense  on  the  shelf,  tucking  it  away  into

 a  winter  hibernation  of  sorts,  thereby  making  it  much  easier  to  take  part

 in  the  once  per  year  phenomenon  known  as  Black  Friday,  the  mother  of  all

 shopping  days.  The  problem  with  this  practice  is  that  financial  reality  is  just  around  the  corner,  never  failing  to

 emerge  in  January  as  a  mailbox  full  of  credit  card  statements.

With  avid  shoppers  counting  down  the  days  until  the  Black  Friday

 bonanza,  Consumer  Credit  Counseling  Service  of  Northeastern  PA

 (CCCS)  offers  the  following  10  reminders  of  the  ramifications  of  overspending:

Adding new debt on top of

old  is  never  a  good  idea,  yet  many  people  will  enter  the  2013  holiday  shopping

 season  still  paying  for  2012  purchases.   When  debt  is  carried  over  from

 month-to-month,  cardholders  lose  the  benefit  of  a  grace  period,  the  time  during  which  a  person  can  pay  the

 monthly  credit  card  bill  before  interest  begins  to  accrue.   When  debt  is

 revolved,  new  purchases  begin  to  incur  interest  immediately.

Paying interest on the interest occurs  when  debt  is  carried  over  from

 month-to-month. When  a  debt  is

 not  paid  in  full  by  the  due  date,  interest  is  added  to  the  balance.   This  amount  adds  up  over  time,  creating  an

 impediment  to  becoming  debt  free.  

Late fees and over-limit fees  can  cause  balances  to  grow  to  an  unmanageable

 level.  Issuers  may  charge  a  late  fee  of  $25  with  the  first  late

 payment,  and  with  45  days  notice,  increase  the  Annual  Percentage  Rate  (

APR)  to  a  higher  interest  rate  on  new  purchases.   However,  consumers  who  make  late  payments  more  than  once  in  a  six-month  period  may  be  assessed

 a  higher  late  fee  with  the  penalty  APR  also  applied  to  existing  balances.

  

An inability to pay as agreed  could

 result  in  negative  notations  on  a  person’s  credit  report,  with  late  or

 missed  payments  remaining  on  the  report  for  seven  years.  Further,  the

 all-important  credit  scores  are  based  on  information  in  the  credit  report.  Along  with  other  factors  and

 depending  on  the  extent  of  the  delinquency,  the  drop  could  be  by  as  much

 as  100  points.    

Less credit will be available on existing cards.   Credit  cards  have  a  spending  limit  beyond  which  the  user  cannot

 charge  without  penalty.   Since  no

 one  knows  what  tomorrow  holds,  over-utilizing  open  lines  of  credit  can  leave  a  person  without  a  credit  safety  net

 for  future  purchases,  unplanned  expenses  or  emergencies.    

Diminished access to new or additional credit  can  be  the  result  of

 irresponsibly  handling  existing  credit.   Issuers  are  less  likely  to  extend  more

 credit  to  a  person  who  cannot  manage  current  debt  obligations.   If  credit

 is  granted,  it  will  likely  be  at  a  higher  interest  rate.   

Beyond credit cards, decisions  involving  Insurance,  renting  an  apartment,

 establishing  utility  or  cell

 phone  services,  or  finding  employment  can  be  affected  by  a  person’s  ability  to  manage  debt.   

Servicing a large amount of debt can  diminish  the  amount  ofmoney  available  for  other  necessarycomponents  of  financial  stabilitysuch  as  saving  or  investing.   

Bills not paid on time can have very serious consequencesincluding  collection  efforts,  lawsuits, judgments  and  wage  garnishment. Each  of  these  can  have  a  long-termnegative  impact  on  a  person’s  dailylife  as  well  as  future  borrowingpower.

Overspending can force a person into making desperate choices  suchas  resorting  to  pay-day  loans,  pawnshops,  bankruptcy  or  debt  settlement.

“Now  is  the  time  for  financialawareness,  not  after  the  damage  isdone,”  said  Terri  Stocki,  EducationDirector  at  CCCS,  an  NFCCmember  agency.   “Consumersneed  to  ask  themselves  if  takingon  unmanageable  debt  this  holidayseason  is  worth  putting  their  financialwell-being  at  risk.”

For  a  quick  and  easy  snapshot  oftheir  current  financial  picture,  CCCSurges  consumers  to  utilize  the  freeonline  financial  self-assessmenttool  at  www.MyHolidayCheckUp.

org.  Doing  so  in  advance  of  holidayshopping  positions  a  person  to  makewise  spending  decisions,  a  gift  thatwill  last  long  after  the  holidays.  

For  help  constructing  a  workableholiday  budget,  or  to  discover  howto  pay  off  existing  debt,  considerCCCS’s  Sharpen Your Financial Focus™  program  available  online  atwww.SharpenToday.org.  To  beginthe

 program,  connect  directly  to  theclosest  CCCS  by  calling  toll  free( 800)  922-9537.