With all the forecasts of a soft Christmas for retailers, consumers may be waiting for super deals -- markdowns too good to pass up. But those tempted by plunging prices should be aware that they can go broke snapping up bargains.
According to Bankcard Holders of America, a national consumer group based in Northern Virginia, Americans already have run up more than $200 billion in debt on their credit cards -- up from about $80 billion in 1980 -- and are paying an average 19.5 percent interest on outstanding balances. And, beginning in 1991, consumers will not be able to claim any income-tax deductions for consumer-interest payments.
The tendency to overspend during the holidays lands many people in hot water. January, February and March are the busiest times of the year for the Consumer Credit Counseling Service of Md., a non-profit service affiliated with the National Foundation for Consumer Credit.
The flood begins "once the holidays are over and they begin looking at their bills," says John Geingler, education director for the Catonsville-based organization. "Many people go out and use their charge cards and don't keep track. Then they wake up in January and their bills are much higher than they expected and their payments are much higher than expected."
The No. 1 step people can take to prevent a hangover from binge spending is to plan ahead, Geingler says.
"We all get caught up in the Christmas season," Geingler adds. "There's the pressure of advertising, of the season, of giving. People need to put a cap on their spending ahead of time."
Here are some tips to keep your holiday spending in bounds:
* Decide how much you will spend for Christmas -- and stick to it. Look at your current financial situation -- your income and your expenses -- and figure out how much you really can afford. Don't forget to include costs aside from gifts -- Christmas dinner, for instance, if you are having the clan over, or a holiday get-together. Even Christmas greenery -- a fresh tree, wreaths, some holly and garlands -- can easily top $100.
* Once you have arrived at an overall figure, subtract the fixed costs -- the turkey etc. -- and see how much is left over for gifts. Don't forget to account for stuffing those stockings hung by the chimney with care. Decide how much to spend on each person and find a suitable gift to match the price tag.
"Sit down with a piece of paper and make a list. Even tailor the list of recipients. Maybe only give gifts to the kids," Geingler suggests.
* Be creative. "We don't have to go out and get head over heels in debt," Geingler says. One year, for instance, Geingler's son gave him a certificate promising to wash and polish his father's car five times during the upcoming year. "I was delighted, and he did it," he recalls. Similarly, you can give a pledge for a service, or make a craft or food item.
* Use cash as much as possible and decide how much you will charge. "People have to remember that eventually they will pay," Geingler points out. If you're prone to impulse buying, take a certain amount of cash along and leave the plastic at home.
* If you're going to charge and spread payments out, use a low-rate national credit card in department stores instead of the store's own card. Most retail cards carry a higher rate, often 20 or 21 percent, compared with an average 18.7 percent for bank cards, according to Bankcard Holders. And lower-rate bank cards can be obtained by shopping around. If you're planning to charge and pay off the balance at the end of the month, however, use the retail cards; they don't carry annual fees.
Bankcard Holders offers lists of both low-rate bank cards and no-fee bank cards. They are available for $1.50 each from Bankcard Holders of America, 560 Herndon Parkway, Suite 120, Herndon, Va. 22070.
* Watch out for deferred payment purchase plans, skip-payment credit cards and unrequested increases in credit limits, advises Elgie Holstein, the director of Bankcard Holders. Interest payments often accrue both in deferred payment plans and "skip-option" cards that allow the card holder to make payments every other month. And even if the first few months are payment and interest free, don't forget: somewhere along the line you will have to pay. If your cash flow is poor now, it's likely to be poor three months from now, too.
* Look for bargains, but don't spend more than you planned in order to "take advantage of a good deal."
* Don't wait until the last minute; that's when you're more vulnerable to panic buying.
Above all, if you're already overextended, curtail your holiday spending and especially don't add to your debt load. People who come to the Consumer Credit Counseling Service know they're in trouble, Geingler says, when they sit down and ask themselves, "Do I pay Sears or do I pay Wards?"
"And if you fall behind in your payments, the bank can demand immediate full repayment," Holstein points out.
John Wysong, extension economist with the University of Maryland's Cooperative Extension Service, also cautions consumers to be wary of the weak economy.
"Basically interest rates are very high right now and people have pretty heavy debt loads. And we're in a recession that will probably last through the first half of next year," he says.
People who find themselves in trouble can get help from the Consumer Credit Counseling Service, which operates eight offices in Maryland. Often people can be helped without having to get into a formal debt repayment program, Geingler says. To find the center nearest you, call the Catonsville headquarters at 747-6803.