Avoid Going Deep into the Red on Valentine's Day

Valentine’s Day is upon us, a time when we are encouraged to open up our hearts, and our wallets. 

While your honey may be coveting Balenciaga’s (PPR) latest it-bag, the $22,500 yellow crocodile weekender, your budget may be more like dinner for two at Red Lobster (DRI). Either way this year Americans will shell-out more on Valentine’s Day than ever before: $122.98 on average, according to the National Retail Federation. Nationwide, that’s more than $17 billion.

That may sound like expensive already but for people with credit card debt–and the national median outstanding balance is $8,333, according to the American Institute of Certified Public Accountants–the amount you pay for that kid-free meal of lobster tail and champagne could easily balloon into four-figures by the time you pay off your bill. That is why financial planners warn against spending big this Valentine’s if you are in debt.

“One of the dumbest things people can do is rack it up more debt,” says former Price Waterhouse CPA Jim Trippon, author of "How Millionaires Stay Rich Forever." It might be hard to believe, but if you have credit card debt and charge $122 this Thursday, it could cost you closer to $1300 after interest and finance charges. “Many people carry a 24% interest rate on their cards,” says Trippon. “If you keep a balance on your card and pay minimum payments, that simple gift could take 20 years to pay off.”

Since the Federal Reserve cut the interest rate to 3% in September, many banks like Bank of America (BAC) have responded by upping fees and rates on credit cards. Bank of America recently notified several card holders that their rates would increase, sometimes doubling to 28% because of a "periodic review" of consumers risk. Trippon sees the increase as a response to the recent federal cuts.