Avoid A Plastic Christmas

RESOURCES

You can find helpful tools, such as a credit card payment calculator and search engines to find the best rates on credit cards, CD rates and loans, at:

  • money.cnn.com
  • www.bankrate.com
  • www.creditcarecenter.com
  • Staying out of debt can be most challenging at the holiday season. Owner-operators who feel guilty for being away from family tend to overcompensate with credit-card-fueled gift-buying sprees.

    You can avoid this by setting aside the dollars per week or per month you need to adequately fund a gift account. Of course, that’s easier said than done when you’re struggling to save for tires, quarterly tax payments and other business expenses.

    One solution is to have an amount drafted monthly from your checking account into a savings account offered by your bank or credit union, or a money market fund or a certificate of deposit. ING Group’s Direct Orange Savings Account (www.ing.com), offering 2 percent return, is one of the best plans for this type of savings, advises Kevin Rutherford, who serves almost 500 owner-operator clients through his Orlando, Fla., financial services business, The Alliance.

    Those who choose to lean on credit cards for a holiday binge – or for any spending that can’t be paid off each month – should be aware of credit-issuers’ sleight-of-hand.

    “Because of lower and lower rates and zero-percent balance transfers, credit card companies aren’t making any money, so they’re getting tricky about it,” Rutherford says. Your regular rate might be 9 percent, but that doesn’t stop the companies from conniving ways to bump it into the teens, even over 20 percent:

  • Cash advances are sometimes billed at higher rates than purchases.
  • Missing a payment deadline can automatically shoot the rate much higher. In some cases, the rate remains at that level.
  • The credit company can simply give notice that it’s raising rates.
  • The good news is that you have alternatives if you get stuck with a higher rate than expected. “There’s enough cards with zero-percent balance transfers that you can move it around,” Rutherford says. In many cases those deals charge no interest for six months.

    Credit card use has become a classic case of “buyer beware.” Read the fine print before you sign up for an account. Monitor your statements monthly to see if your rate has spiked.

    And if you haven’t saved for this year’s round of gifts, resolve to bite the bullet and live within your means. Then start a plan for next year.


    RED FLAGS

    You know your debt burden is too high when:

  • You have to borrow most or all of the cost of routine operating expenses, such as tires, fuel and oil.
  • You can’t meet the minimum monthly payments on your credit cards.
  • You find yourself looking for new sources of credit because existing ones are maxed out.
  • Worries about what you owe ruin your sleep.
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