Staying Out of Holiday Debt with Credit Cards

The day after Thanksgiving, also known as "Black Friday," is one of the busiest days of the year for shopping. NPR's Steve Inskeep talks to Scott Bilker, founder of DebtSmart.com, who says this holiday season, shoppers should charge everything to their credit cards.

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RENEE MONTAGNE, host:

On Friday, our business segment focuses on your money. Today, one of the busiest shopping days of the year, we'll look at whether to buy on credit, with cash or not at all. Americans are expected to spend nearly $440 billion this holiday season, that would be 6 percent more than last year. We visited the National Mall in Washington, DC, to find just how some consumers plan to pay for their holiday gifts.

Ms. CAROL SNYDER(ph) (Shopper): Carol Snyder, I'm from the Philadelphia area and unfortunately, mostly we use our credit card. It's an immediate, we can get it done. We can worry about the cost later.

Mr. GEORGE PIZANNO(ph) (Shopper): George Pizanno, I'm from Woodstock, Georgia. Christmas is a big deal for us, so we'll charge up our credit cards, only way to be able to buy presents right now.

Ms. KRISTIE WAUSHA(ph) (Shopper): I'm Kristie Wausha, I'm from Livonia, Michigan, and I sit in the middle of the night and do all my shopping on the Web. My credit card is linked up to--as a debit, so it comes right out of my checking account. It's done, it's paid for, don't have a bill after the holidays, so it's nice.

SHONDA(ph) (Shopper): My name's Shonda. I'm from Salt Lake City, Utah. Cash, cash, yeah. Done the credit card thing, don't like it. I've learned my lesson. I've really learned my lesson.

MONTAGNE: Lesson or no lesson, more than $120 billion will be charged on credit cards this season. Steve Inskeep talked to a man with his own ideas about how to make the most of holiday credit.

STEVE INSKEEP, host:

The last time we met Scott Bilker, he was telling us how he improved his finances by ignoring standard financial advice. Instead of one credit card, he had dozens and he was perfectly willing to pay off one card by borrowing from another among other things. Scott Bilker runs a Web site called DebtSmart.com and he's with us once again.

Welcome to the program.

Mr. SCOTT BILKER (DebtSmart.com.com): Thanks, Steve. Great to be here.

INSKEEP: OK. Now at holiday time or any time really, I'd rather avoid running up a lot of debt on credit cards. What is your advice at this time when people are spending a lot?

Mr. BILKER: Well, the important thing is to make sure that you plan in advance. It's not really the credit card spending that's going to get you, it's the credit card overspending that'll get you. So it doesn't really matter what you use to pay for your gifts; it just matters that you stay within whatever your plans are. And one of the smart ways to do the purchases is by using credit cards.

INSKEEP: Put everything on the credit card?

Mr. BILKER: I would put everything on the credit card because there are many advantages to doing so. I'll tell you just a few. First, there's the interest-free grace period. You've got better purchase protection because--in case you have trouble with the merchant, you can do a charge back or dispute the charge. You're building your credit worthiness by using your credit responsibly. And you might be able to get other discounts, too, by using credit cards, whether it's department store cards or cash rebates. And one I personally like to use is an entertainment card which gives me gift certificates to the movie theater. But the trick is just find a reward card that works for you, and that way, you can get the most use out of all your spending and take advantage of everything, since you have to spend the money anyway.

INSKEEP: And then there's those breathtakingly high payments that will arrive at the end of the month.

Mr. BILKER: That's true, but what you've got to do is be debt smart where you have to take your best credit options and use them to your advantage. If you don't have the money to pay for it then, but you should because you planned in advance, you need to take advantage of another low-rate credit card offer to pay off those bills and make sure that you're not late.

INSKEEP: This is maybe one of your more controversial things--you're arguing paying off your debt with another credit card if you can use that to extend the grace period and get more time to pay everything.

Mr. BILKER: Yes, because you never want to be late. If you're late, banks raise your rate because of penalty rates. Sometimes, it's as high as over 30 percent APR, and that's not even counting, you know, the late fee itself.

INSKEEP: Now department store credit cards typically have higher interest rates than some other cards. Would you recommend using them at all?

Mr. BILKER: I would use them if there a benefit to you. For example, if they're going to offer like a 15 percent discount on stuff, that it's your plan to shop in this place and buy stuff there anyway, you might as well use the discount. The important thing is to make sure you track everything so that way you don't get caught with that high rate. They're going to have grace periods so when the bill comes, as long as you pay it off in full, you'll be fine. So this way, you're going to get the benefit of that discount. They're hoping you're going to make the mistake of not paying it all off, but we're going to be smart and pay it off when the bill comes.

INSKEEP: Scott, can you remind us how many credit cards you have now?

Mr. BILKER: Sure, I have about 80 credit cards and I don't use them all or we'd be doing a show about bankruptcy right now because I could never afford to use all those cards and pay them off.

INSKEEP: Which leads to my next question. Have you become any more cautious since the bankruptcy law changed?

Mr. BILKER: You know, that's a really good point. Since the bankruptcy law has changed, everyone's got to be more careful to manage their debt properly. I haven't had to be more cautious because I only use my credit cards every couple weeks, so that way the cards aren't cancelled by the banks for inactivity. The advantage I have is that I have so many credit card offers and especially during this holiday season, one tip that I recommend to everyone is call your credit card bank now and tell them, `Listen, if you want me to use you this holiday season, you're going to have to give me a reason. I want a low rate, I want 0 percent until April. But if you want me to use you, you've got to give something, because I've got 10 other credit cards. And they're going to make the money or you can make the money. Tell me now, I've got other phone calls to make.'

INSKEEP: Scott, thanks very much.

Mr. BILKER: My pleasure. Thanks for having me, Steve.

INSKEEP: Scott Bilker is the author of "Talk Your Way Out Of Credit Card Debt."

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