How can consumers purchase holiday gifts for loved ones without winding up with a skyrocketing credit card bill?
Despite rising household debt and an increase in credit card balances, consumers reportedly spent a record $9.1 billion online shopping during Black Friday.
Mike Neugent, assistant finance professor-educator and director of the MS finance program, told WVXU's "Cincinnati Edition" that the holidays are a dangerous time for consumers to run up debt.
"There's a lot of emotional spending. We have a culture of giving gifts and that more is better," Neugent said. "Another unusual thing that tends to happen more during the holidays is that everything is on sale. So, we have a mentality of, 'Because it's on sale, it's a good idea for us to buy it.' There's a dramatic difference between need and want. With something that's on sale, we usually don't need it, we want it."
Mike Neugent (seated, gray blazer) was joined by WVXU host Lucy May (left) and Al Riddick, founder/president, Game Time Budgeting.
According to WVXU, total household debt has increased to $16 trillion, with a 15% increase in credit card balances over last year, per the Federal Reserve Bank of New York.
"At some point, it has a negative impact on the economy. You're going to have an increase in bankruptcies, foreclosures, repossessions of cars," Neugent said. "While a company may benefit in the short term - GM sells more cars, Nordstrom sells more shoes - in the long term, the negative impact is consumer spending is going to decrease. It also has a significant impact on the employment market."
Neugent noted that it's never too late to rectify a poor personal financial situation.
"We've all probably gotten into that hole sometime in our lives. Very few of the financial vehicles we have available to us are good or bad. It's how we use them," Neugent said. "Credit cards are not good or bad; it's how we use them. We always have the opportunity to turn things around. There are ways to refinance credit card debt and reduce your interest payment. Those opportunities are there."
