Credit Card Debt and the Holiday Season
The holiday season happens every year. We know it is coming but many of us find it very difficult to put away money on a monthly basis to ensure we have enough saved to cover the cost of the holiday season.
Rather than scale back to curb overspending, many of us rely on credit to purchase all the items we need for the holiday season. When you factor in gifts for friends and loved ones, the extra cost of food and travel, and perhaps new clothes to attend those holiday parties this expense can be very high.
When caught up in the emotion of the holiday season, the decision to charge all the costs to a credit card and make monthly payments on our credit card debt seems reasonable. After all, the cost per month probably won’t be that much. And, once the season is done, some individuals take it even further justifying the buying of even more items after the holidays to take advantage of the post-Christmas sales.
The real consequence of that holiday spending is easier to understand if you look at an example.
Ex: If you charge $2,000.00 to a credit card at an interest rate of 18 per cent the minimum monthly payment is only $50.00 per month.
If you are required to pay interest plus 1 % of the balance fifty dollars per month seems very affordable. However, if you only pay the minimum payment it would take you approximately five years to pay off the total balance.
Most people will look at this example and will advise that it is their intention to pay more than the minimum payment to pay it off faster. This is a better approach, but it still presents some concerns.
A regular payment of $100.00, for example, will still require 24 months of payments before this balance is paid in full. And in that two year period, it will also cost you an additional $396.00 in interest charges.
Even if you can afford to pay $100.00 per month in your current household budget, what happens next Christmas? It is unlikely that you can afford to put away money for next Christmas while you are still paying your debt accumulated for this Christmas. For many individuals this is the start of the cycle of debt- each year the debt load increases and the cost of carrying that credit card debt becomes a source of stress and anxiety.
If you are caught up in the endless cycle of debt, either because of Christmas spending or because you’ve used credit to pay for any number of things that you did not have money to buy, it may be time to give yourself a gift this holiday season.
Contact a Licensed Insolvency Trustee to discuss your options for dealing with debt. You can meet in person with a trusted advisor who will work with you to find a solution to your debt troubles. Enter the new year with a plan in place to be debt free and call a Trustee today.