For Karen Wallace, opening bills these days is no biggie, but it used to bring her big-time anxiety.
“Looking at my Target bill one day, I looked at how long it would take me to pay it off if I just made minimum payments—and it was in my 50s,” Wallace said.
She is one of the millions of Americans who’ve opened credit cards or store cards, attracted by the promise of rewards or discounts. She was in her 20s when it happened, before marriage and motherhood.
After charging $11,000, Wallace realized her debt outweighed any benefit she might’ve received. “I would pay one and not the other because I couldn’t afford it,” she said. “It was just terrifying.”
Thomas Moeller is an associate professor of finance at Texas Christian University. “Generally those store cards come with very high interest rates,” he told WFAA. “So you might save 5 percent on your purchase, but then if you have a 25 percent interest rate, if you keep a balance a little over two months, you’re losing the 5 percent.”
Moeller says stores are counting on people this holiday season to open cards and not pay their bills in full, or to keep spending. A recent report from Nerd Wallet showed about 39.4 million Americans who charged their holiday shopping last year are still paying it off. “I think it’s a real problem,” Moeller said.
He says debit cards or cash is key. If you don’t have the discipline or money to pay your charge cards, don’t use them. According to Wallet Hub, one in six people plan to apply for a new credit card just for holiday shopping.
Times have changed for Fort Worth teacher Karen Wallace. “Black Friday, if I don’t have the cash, we just don’t do it,” she said. She ended up having to take out a loan and paid off her credit card debt in five years. She said she plans to keep it that way.