Use your head when you use your card


December 13, 1992|By JANE BRYANT QUINN | JANE BRYANT QUINN,1992, Washington Post Writers Group

New York -- This year's strategic holiday shopper i minimizing credit-card debt. It's hard not to put at least some Christmas presents on the cuff. But here are 19 ideas for cutting your interest costs:

* Consolidate the bills on your lowest-rate credit card, a loan from a credit union or a home-equity line of credit. It doesn't pay to open a home-equity line just for Christmas bills. That's because banks could charge several hundred dollars for start-up costs. But if you have a line already, the interest rate might run from 7 percent to 7.5 percent, tax-deductible.

* Pay off small bills immediately. Some lenders charge minimum service fees on small accounts.

* Compare the interest rate on your bank credit card with the rate on your retail charge accounts. Stores generally charge more, so it doesn't pay to use their cards.

* Don't use retail-store plans that let you wait until spring to make the first payment on your Christmas bills. Interest usually accumulates on that debt, running up your cost. They're good deals only if no interest is charged.

* When you shop in a new store, don't open an instant charge account. With new credit in your pocket, you might spend more than you intended.

* Don't buy just one or two items from a catalog without checking the postage and handling cost. I almost ordered a $12 gift before noticing that I'd pay at least $6 in extra charges, whether my order was large or small.

* Raid your savings account to get the bills paid. What's the point of hoarding money that earns 3 percent when your credit card debts cost 18 percent? You're losing 15 percent on that deal.

* Don't raid your mutual fund for cash, unless the shares sell for less than you paid. Shares sold at a profit leave you liable for a tax on the gain -- and the tax might be higher than the interest you save by paying off your credit-card bills. If you sell at a loss, however, you can clean up your bills as well as create a loss deduction on your tax return.

* If you carry an American Express card, use it heavily this year. You have to pay AmEx bills in full, so you can't be tempted to stretch them out. But how come you're still carrying this card? It costs $55 a year -- $75 for the gold card -- compared with $15 or $20 for a basic Visa or MasterCard.

* If you've been accelerating your mortgage payments, put that plan on hold while you repay the Christmas debts. You pay a higher rate of interest on your credit card than on your mortgage.

* Add up your Christmas bills and divide by three. Pay one-third each month, by slashing your spending to the bone.

* Alternatively, double or triple all the usual payments on your charge accounts and credit cards. Pay these bills as soon as your paycheck comes in. He who hesitates will spend.

* Charge nothing more until the holiday is paid for.

* Check all bills for errors. Computers get things right, but the people who work with computers don't.

* Do no last-minute shopping. Spending panics hit in the days before Christmas when you're tired and cranky in the mall. You suddenly fear that you haven't "enough," or that one child got one gift too few. Two days later, when your perspective returns, you'll probably find that you overbought.

* Set a budget. Shop with a list and stick to it. That sounds mundane, but it will save you more money than anything else.

* Don't shop the post-Christmas sales. Nothing is cheap if you don't really need it. The easiest bills to pay are those you don't incur in the first place.

* If your parents give you a check for Christmas, put it toward paying off your bills. If your mother asks you what you bought, tell her "peace of mind."

* In January, start your own Christmas Club. Add, say, $10 a week to your savings account and leave it there. By next Christmas you'll have nearly $500 to spend. If you squirrel away $15 a week, you'll have more than $700. "Cash Christmases" cost the least of all.

(Jane Bryant Quinn is a syndicated columnist. Write her at: Newsweek, 444 Madison Ave., 18th Floor, New York, N.Y., 10022.)

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