Holiday Overspending Can Have Long-Term Consequences
Millions of consumers have begun their holiday shopping, snagging sale items either in-person or online, and therefore considering themselves savvy shoppers. At the same time, many have lost sight of the fact that regardless of the price, a bargain isn't a smart purchase if it compromises a person's overall financial health.
"If there's one time of the year when people shop with their heart, not their head, it's the holiday season," said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC). "Emotional spending during the holidays is often the tipping point that pushes people over the edge financially, as common sense can take a backseat during this time of the year."
To help consumers remain financially responsible during the holidays, the NFCC offers the following five reminders of the long-term consequences of over-spending, some of which can last far after the lights are taken down and the tinsel is packed away.
- Paying additional interest - Adding new debt to an existing debt load, one which cannot be paid in full when the bill arrives, equals paying a larger dollar amount of interest due to the higher outstanding balance. Even worse, when a balance is carried over from month-to-month on an account, interest is paid on the previous months' interest. People often boast of buying an item on sale, then pay for it over time, thus wiping out any savings.
- Diminished future borrowing power - An increased level of debt could cause lenders to decline applications for new lines of credit or loans. Since no one knows what the future holds, not being in a position to tap into new credit is something to guard against.
- Diminished future buying power - Buying on credit is a contractual agreement to pay the debt later, often with money that has yet to be earned. Using tomorrow's money for today's expenses compromises future spending.
- Lower credit score - Excessive debt often leads to paying late, skipping payments, and utilizing too high a percentage of open credit, all of which could lower the all-important credit score. Further, applying for new lines of credit simply to save money on today's purchase will not only increase the temptation to spend, but will show as an inquiry on the credit report, potentially lowering the score.
- Debt interferes with life - Debt is a 24/7 problem, distracts people from their job and home-life, interrupts sleep and potentially causes marital strife.
"With the economy still on shaky ground and job security not something to be counted on, it makes no sense to self-inflict financial damage thTo find a solution to your financial dilemmais holiday season," continued Cunningham.
To develop a healthy plan for holiday spending, reach out to Consumer Credit Counseling Service, an NFCC Member Agency since 1981. To contact CCCS, call (423) 490-5620, email CCCSreception@partnershipfca.com, or chat online with a counselor now!
The National Foundation for Credit Counseling (NFCC), founded in 1951, is the nation's largest and longest serving national nonprofit credit counseling organization. The NFCC's mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services. NFCC Members annually help more than three million consumers through close to 750 community-based offices nationwide. For free and affordable confidential advice through a reputable NFCC Member, call (800) 388-2227, (en Español (800) 682-9832) or visit www.nfcc.org. Visit us on Facebook: www.facebook.com/NFCCDebtAdvice, on Twitter: twitter.com/NFCCDebtAdvice, on YouTube: www.YouTube.com/NFCC09 and our blog: http://financialeducation.nfcc.org/.