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By ELIZABETH PEZZULLO
You've crammed yourself full of turkey and gotten suckered into Black Friday mania.
Now put your remaining cash back in the wallet and lock up the credit cards. There's still time to put a halt to rampant holiday spending.
Financial consultants don't want you digging out of debt until the Fourth of July, and are at the ready with advice on how to avoid it.
First things first, according to Trish Lynch, a financial specialist with Richmond-based ClearPoint Financial Solutions.
Before even stepping out the front door, "write a list with the person's name and put a dollar amount next to it," she said. "And stick to it. Don't exceed it."
Lynch says psychologically we're not as cautious as we should be when it comes to holiday spending.
"A lot of times you'll just pick something up and go with it to get away from the crowds," she said. "And it's usually something you don't need."
Rule No. 2: Don't fall victim to the "Get 10 percent off your purchases if you sign up for a [ANY STORE NAME] credit card today."
"That's a trap," Lynch says. "One of the major pitfalls of holiday spending is that all the shops are soliciting very specifically to open new charge accounts. But most retailers charge more than 21 percent interest. You'll still have to pay that finance charge."
Lynch advocates not using credit at all.
"You don't want go into debt or spend what's not affordable to you," she said.
Lynch makes two other important points:
If you apply for too many credit cards at one time, your credit score will take a hit. And credit card companies are starting to raise their minimum monthly payment or will do so soon.
Despite all the cautionary notes, consumers will be loosening the reins when it comes to spending this season.
The National Retail Federation 2005 Holiday Consumer Intentions and Actions Survey found that the average customer plans to spend $738.11 this holiday season, up 5.1 percent from last year. The survey is consistent with the federation's holiday sales forecast, announced last month, which expects total holiday retail sales to increase 5 percent over last year to $435.3 billion.
Perhaps an omen of the times, a local banker recommends consumers take out home equity loans to cover holiday expenses.
"People come in after Christmas because they get behind and then taxes start coming due," said Brian Yost, a mortgage specialist for Sterling Mortgage Corp. on William Street.
Yost mailed 300 postcards in the Fredericksburg area--with a cute little snowman on the upper left corner--encouraging consumers to tap into the equity in their homes for extra holiday cash.
"Maybe this year you're going to buy a car or go on a cruise," he said. "Use the equity in your home."
Yost emphasizes that interest on a standard home-equity loan--currently about 7 percent--is a lot less than what the banks charge for credit cards.
"You can defray credit cards at 18 and 20 percent interest with a home-equity line of credit," he said.
Lynch balks at the idea.
"The whole point is that you don't want to use credit at all," she said. "To go out and spend thousands on Christmas and pay interest on it whether it be credit or loans [defeats the purpose]."
Lynch concedes, however, that credit cards can be used under certain circumstances. And some credit card companies offer deferred payments and zero interest.
"Only use them if you are disciplined and going to pay them off," she said.
There's also other ways to avoid debt and the madness of holiday shopping.
"Offer to baby-sit the kids for someone," Lynch said. "Or give some home-baked goods."
To reach ELIZABETH PEZZULLO:
Email: epezzullo@freelancestar.com
