How to avoid debt this holiday season

CHARLOTTE — Black Friday is almost a week away, and many of us will be hunting for deals while paying for our holiday presents with credit cards.

But those bargains could end up costing you a whole lot more in interest.

Consumer Advisor Clark Howard is providing some advice on how to avoid debt this holiday season.

It might seem overwhelming to dig yourself out of a mountain of debt, but you can do it.

“I was 23 years old with $25,000 of credit card debt,” consumer Sami Johnson said.

Johnson said she got hooked on store credit cards as a teenager. She said she used to work in retail and even pitched them to customers.

“Not at one point did I mention to them an interest rate. I said, ‘Do you want to save 20% on your purchase today?’” Johnson explained.

However, store credit cards typically come with high interest rates, and those high rates could cause your credit card bills to snowball.

Johnson said she eventually realized she was in over her head. “I’m paying out 25 different bills. What am I doing?” she recalled.

The average interest rate is 22.76% for new credit cards, according to Wallethub. Store credit cards possess up to 36% interest rates.

Kate Bulger with Money Management International said those interest rates, along with higher expenses, make it easier for debt to pile up.

“Suddenly, now, even though they’re making that same payment every month, that balance is continuing to grow and grow,” Bulger said.

Bulger said setting a holiday budget is key to avoiding a holiday spending hangover.

“In January, as those first credit card statements come in, that’s when we really start getting calls,” Bulger explained.

Johnson said she signed up with Money Management International to help her tackle her debt.

“I had about 15 or 16 different store cards. So, I’d say half of them were able to settle. Half of them got the interest rates cut off, and half of them said, ‘Deal with it and pay us.’ But there is hope to get out of it. As long as you have the right people in your corner and your team,” Johnson explained.

Johnson said she sacrificed spending on fun things like eating out and managed to pay off her $25,000 debt in five years.

Bulger said that on average, credit scores increase by over 82 points.

“Which is an incredible amount. And for a lot of clients, about one in five consumers who are renting end up purchasing a home because they were able to pay off their credit card debt through a debt management plan,” Bulger explained.

The whole goal is to avoid financial holiday hangovers altogether. So, when you’re at the register and they offer you an instant credit from the store, do not fall for it.

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