Paying for the Holidays
January 8, 2008
For those consumers who used their credit cards to pay for their holiday shopping, the bill man cometh. There is a tendency among some consumers to avoid opening that credit card statement when it hits the mailbox, but that could be a big mistake.
Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, suggests taking a more responsible approach. “You have got to open your bill in a timely fashion,” she said. “We see people every day with grocery sacks full of unopened bills.”
Avoiding that credit card statement can open up the possibility of being late with the payment. This can result in some very high late payment fees, some of which are in the forty dollar range.
More importantly, being late means your credit card company can raise your interest rate to as high as 30 percent.
“Some cards can even raise borrowers’ interest rates in response to a late payment on another creditor’s account,” said Ethan Ewing, president of Bills.com, a personal finance Web site.
If that were not enough, late payments can and do result in lower credit scores for many consumers. Payment history makes up the largest component of the FICO credit score. In fact it accounts for about 35 percent of overall grade.
Many experts agree that paying off your credit card purchases is a great way to increase your financial health. A starting point is to set a payoff date or a goal date.
“Most people shopped for Christmas 2007 while still paying for Christmas 2006,” Cunningham said