Orman: Triple minimum payments to dig out of debt

Digging out of holiday debt

wtopstaff | November 14, 2014 3:04 am

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Paula Wolfson, wtop.com

WASHINGTON – It’s time for the January ritual most consumers dread — the arrival of holiday credit card bills.

Financial guru Suze Orman tells WTOP a stack of bills is a sign of trouble. She says it means you overspent and have put yourself in a monetary hole.

“You spend all year trying to get out of debt, and then in two weeks in the holiday season, you get straight back in,” she says.

Orman says too many people work hard all year to get out of debt, only to fall right back in during the holidays. She’s emphatic in saying there is no reason for anyone to carry any credit card debt at all.

“I don’t care who you are,” she says. “If you do, you are doing something wrong.”

That said, Orman has some tips for those who have a holiday financial hangover.

The first step is to take a close look at your credit card statements, especially if they entice you to pay the minimum amount due. Orman says to look at the bottom line and realize that a charge of $3,000 on a credit card for holiday gifts means you’ll essentially pay $9,000 for those gifts over time by making small payments.

She says the goal should be to pay credit card bills in full. If that’s not possible, then at least pay triple the minimum due to get out of debt sooner.

One option to pay off the bills immediately is to tap a savings account for the cash. Orman says that’s a great idea at a time when savings accounts aren’t making much money. But she says to make sure the cards being paid down allow cash advances. That way there’s a backup plan in an emergency.

Orman, who has written many books on personal finance and is a familiar face on TV, has been crusading against credit card debt for years. But she says if you are going to have a card, it’s best to sign up through a credit union since they can’t charge interest over 18 percent.

WTOP also asked Orman if she actually does practice what she preaches during the holidays. She says her family makes gifts instead of buying them.

“We have the best holiday seasons ever!” she says.

Listen to the full interview with Orman above and to the right.

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(Copyright 2012 by WTOP. All Rights Reserved.)

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