WHIO Dayton: MMI and Clark Howard on holiday debt – ‘Don’t fall for it’
MMI’s Kate Bulger and MMI client Sami Johnson join consumer advocate Clark Howard WHIO Dayton to discuss avoiding a "holiday hangover" and paying down debt.
Transcription:
Now it is Clark Howard week here on News Center 7 Daybreak.
Every day Clark is helping us protect our money, protect our privacy, and save some money. With Black Friday just over a week away, many of us will be hunting for the deals and paying with credit cards.
But all those bargains can end up costing you a whole lot of money in interest as well. Clark shows us how to dig out of debt.
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 worth of credit card debt.” Sami Johnson got hooked on store credit cards as a teenager. She used to work in retail and even pitch them to customers. “Not one point did I mention to them about an interest rate. I said, 'Do you want to save 20% on your purchase today?’” But store credit cards typically come with extremely high interest rates. Those high rates cause your credit card bills to snowball. Sami eventually realized she was in over her head.
“I’m paying out 25 different bills. What am I doing?” Right now the average credit card interest rate is 22% for new credit cards, according to WalletHub, and store credit cards can spike as high as 36%.
“And suddenly now, even though they’re making that same payment every month, that balance is continuing to grow and grow.” Kate Bulger with Money Management International, or MMI, says those interest rates along with higher expenses make it really easy for debt to pile up. She says setting a holiday budget is the key to avoiding a holiday spending hangover.
“Middle of January, as those first credit card, um, statements come in, that’s when we really start getting calls.” Johnson signed up with MMI to 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.” She sacrificed spending on fun things like eating out and managed to pay off her $25,000 debt in 5 years. Bulger says on average, credit scores increase by 84 points for MMI clients.
“Which is an incredible amount, um, 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.”
There is hope to get out of it as long as you have the right people in your corner and your team.
Your whole goal needs to be avoiding the holiday hangover. And when you’re at the register and they’re offering you instant credit from the store, don’t fall for it. Don’t take it. I don’t care if they say, “Wouldn’t you like to save 15% today?” The answer is no I don’t, I don’t want more debt. I’m Clark Howard.
Just say no. Our Clark week continues tomorrow morning on News Center 7’s Daybreak as we dig into gift card shopping. Clark will explain how to stretch using gift cards and the common pitfalls shoppers often run into. So be sure to join us right here at 4:25 tomorrow.
