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Credit Cards: the debts that keep on compounding

39% of Americans still paying on last holiday season charges

By JASON GERTZEN
Sunday, Nov. 28, 2004 
 

Like a ghost of Christmas past, last year's holiday spending still haunts Sarah Thorn's credit cards.

Swept up by the sentiment of the season and short on cash, Thorn, soon to be 23, relied on her credit cards to buy gifts for her family and splurge on a few special holiday treats. She didn't think she was spending too much: an "X-Men" DVD and a $30 video game controller for her brother; a $30 Red Lobster restaurant gift certificate for her parents; a few other presents here and there.

Then the bills arrived in January. She was stunned.

The Milwaukee Area Technical College student scraping by with a low-paying office support job had more than $500 in debt and no idea how she would pay it.

"You think it is only going to be a couple extra hundred on there," Thorn said. "Then it's, 'Wow. I spent that much?' "

This time of year, known for its bright lights and good cheer, also has a darker side. Fully 39% of Americans still are paying off last year's holiday credit card bills, and this year's shoppers are poised to charge at least $35 billion more that they could be paying off until Christmas 2005.

"The American public kind of gets blinded by those Christmas lights," said Howard Dvorkin, president and founder of Consolidated Credit Counseling Services Inc., a non-profit company in Fort Lauderdale, Fla., that offers consumer education and financial counseling. "At no other time do people routinely get themselves in (more) trouble than during the holidays."

The average American is expected to spend $700 to $900 this year as consumers fill cash registers and online shopping sites with $220 billion in holiday spending - expectations that outstrip the means of the median American household.

Nearly half of those purchases - $108 billion - will be put on cards of all sorts - credit, charge and debit - by the estimate of CardWeb.com, a Frederick, Md., research firm that tracks the card industry.

This is a matter of convenience for most holiday shoppers, who have set aside money during the year or can squeeze the extra spending into their normal household budget. Consumers will pay 60% of the bills in full, avoiding any finance charges.

But of the $86.4 billion charged to major credit and store cards, according to the 2004 holiday retail sales report of CardWeb.com, 40%, or $35 billion, will be carried from month to month, posing a financial burden adding to the paycheck-to-paycheck struggle of many consumers.

 

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