Don't Let Black Friday Bring You a Bad Credit New Year

Nov 11, 2013

CCCS, Financial Tips for Families

As we move into the month of November, many families across the nation start thinking about holiday shopping and sharing their generous spirit with others. But that sharing can almost be done to a fault for most people during the holiday shipping season.

During this time of the year, millions of people put their financial smarts to the wayside and take part in extravagent holiday shopping sprees on days like Black Friday, and other weekly sales until the holiday season. While these shopping sprees are often done with warm intent during the coldest of months, looking to find the perfect gift for a loved one this season that will bring a smile to their face, the problem with this line of thinking is that a harsh financial reality is often right around the corner in the new year, as mailboxes after the holidays soon become full with January's credit card statements.

But the overspending and finacial stress doesn't have to be a reality. With Black Friday on the horizon, FamilyMeans and the National Foundation for Credit Counseling wants to offer 10 simple and helpful reminders to encourage families to keep their financial wits about them this season:

• It's never a good idea to add new debt on top of old debt. Yet many people will enter the 2013 shopping season still paying on 2012 gifts. When debt is carried over month-to-month, cardholders lose the benefit of grace periods, which is when a person can pay the credit card bill before interest begins to accrue. When you begin new purchases while old purchases are still being paid off outside of the grace period, these new purchases begin to incur interest right away.
• Avoid paying interest on the interest. When debt is carried over month-to-month, after not being paid in full by the due date, interest is added to the amount you owe. This adds up over time, and makes it harder to pay off the debt and become debt free.
• Late fees add to balances, making them unmanageable. If you miss making a payment on your credit card, or face over-limit fees, these penalty charges increase your Annual Percentage Rate (APR) to a higher interest rate on new purchases. People who make late payment more than once within six months may be given a higher APR on existing balances, too.
• Don't let it affect your credit report. Missing payments or making late payments could end up as negative notations on your credit report for seven years. You credit score being based on these credit reports, become a big factor in influencing what your credit rating is, and can drop a rating by as much as 100 points.
• Less credit will be available on existing cards. Unexpected emergencies can occur at any time. If you have existing cards maxed out regularly and are unable to pay off existing balances, having a limited line of credit available for unplanned expenses can put you in danger.
• Mishandling existing credit can reduce future access to new or additional credit. If existing credit cards have a history of not being able to be managed, future options for credit may be limited by creditors, or, if allowed, will likely be offered at a drastically higher interest rate.
• Beyond credit cards. Having outstanding debt that has been mismanaged not only affects lines of future credit and your credit card standings, but it can negatively affect someone looking to rent an apartment, establish utility or cell phone services, and even employment. All of these items can be affected by a person's ability to manage their debt.
• Cuts into savings. Living with a large amount of debt can cut into other money you are building towards, including your ability to become financially stable with savings, investing, and retirement.
• Collection efforts, lawsuits, judgments and more. Daily life can even be affected by living with too much credit hanging over your head, including having collection efforts, judgments, wage garnishments, and more cut into your everyday activities, as well as impacting your future borrowing power.
• Unwanted alternatives. Facing desperate choices in managing your debt can force people into looking at unwanted financial alternatives which bring limited results, including pay-day loans, pawn shops, bankruptcy, or debt settlement.

However, before the shopping season begins is when people will want to keep their financial picture in mind, not after. And getting a snap shot of their current financial picture has never been easier. Today, using a free online financial self-assessment too at www.MyHolidayCheckUp.org, people can discover wise ways to balance their finances during holiday spending.

Need further ideas? FamilyMeans can help locally. Contact us today to schedule a financial planning session to help you stay on track with your finances and minimize your debt as you transition into the New Year.