Sunday, November 22, 1998

Holiday shopping without careful planning can lead to large debt

By SCOTT SCHOLTEN

Staff Writer

Come January, every nook and cranny of Amanda Davis' appointment schedule will be filled.

Davis, a certified consumer credit counselor with Consumer Credit Counseling Service, helps people bail themselves out of their Christmas shopping hangovers, when balances reach their limits or debtors simply cannot figure out how to make minimum payments.

The flood of consultations coincides with the time holiday shoppers' credit card statements add a sobering element to their post-holiday malaises.

Credit counselors such as Davis warn shoppers who feel fattened by the longest U.S. economic expansion in history to tread carefully this holiday season.

After all, personal savings rates actually were negative in October.

"It's really easy to find yourself in debt," Davis said. "Credit is very easy to get. A lot of people don't realize much of (the minimum payment) is in interest."

Since late July, stock markets have behaved like Mr. Toad's Wild Ride, yet failed to deter many from ramping up spending habits.

Between the day after Thanksgiving and Christmas Eve, consumers will be tempted to overspend, says CCCS, a nonprofit agency.

The main culprit?

Impulse buying.

"Impulse shopping reaches new highs on this day (after Thanksgiving)," says Marianne Gray, president of the CCCS of Greater Fort Worth. Stores roll out the red carpet during the holiday shopping season with extra hours, promotions and flexible payment plans to coax extra purchases, Gray said.

The CCCS makes several suggestions to avoid the typical holiday shopping hangovers that can last months.

-- Shop around and make a list indexing what gifts cost how much at each store.

-- Pay in cash to keep credit card balances low or non existent. If charging is unavoidable, promise yourself a payment schedule no longer than a few months.

-- Shop alone to avoid impulse spending and unnecessary purchases.

-- Avoid high-priced fad items, which fetch less value per dollar.

-- Compare what you just spent after each shopping trip against the total allocated for gifts so you won't go over budget.

Shopping receipts will total an average $1,003, according to research by Intuit Inc., maker of personal finance software Quicken.

Intuit says 60 percent of shoppers will not set up a holiday budget.

All this may sound Scrooge-like. And the CCCS is not trying to stub out the holiday spirit by recommending people skimp on their holiday buying.

"I don't want to tell people what to do," Davis said.

But people do need to be brutally honest about incoming revenues and what their bills will be, she said.

"If people are worried about the Christmas season, starting January First they need to set up a plan to pay for next Christmas," so they won't have to shop Christmas 1999 with borrowed money.

Often, Davis said, people will promise themselves to cover Christmas expenses put on credit cards with their tax returns.

But that leaves a few months of hefty interest charges, Davis said.

"It may not follow through that way, but that was the intent in the beginning," Davis said.