NEW YORK (MainStreet) With the holiday season less than five months away, most consumers are not prepared and resort to charging their purchases.
In the past, Americans spent an average of $800 on holiday-related expenses, which is more than a week's wages for many workers. Many shoppers neglect planning for them routinely and wind up racking up large credit card bills.
A lack of planning means severe consequences for consumers who are saddled with paying the interest long after the purchases are made, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC), the Washington, DC-based national nonprofit financial counseling organization.
Read More: Fabulous 15 Toys for Christmas
If a shopper charges $1,000 and makes only the minimum monthly payment of 2% of the balance at an annual percentage rate of 18%, it will take 12 years to pay off the debt. "Think of it this way the ghost of Christmas past will haunt until 2026," she said. "This generous consumer will have paid a total of $2,353 for the $1,000 worth of goods and services purchased."
Finding bargains during your shopping expedition is not the solution, Cunningham said.
"The savings of buying items on sale is lost if payments are stretched out for months," she said. "Make 2014 the year where you are shopping responsibly by creating a plan now, one that allows you to have not only a stress-free holiday season, but also a debt-free celebration."
Consumers can easily have money available for holiday spending and create a debt free holiday by trimming daily spending. By just saving $1 a day, a consumer can save $150 by December 25.
"Review current spending by looking for leaks," Cunningham said. "Plug those leaks and use the found money for holiday spending."