Military Officer - January 2006 - (Page 44)

financialforum Debt Hangover Holiday fun can easily lead to overspending. Phil Dyer, CFP, offers three tips to help control credit card debt before it gets out of hand — just in time for post-holiday bills. D Go Online for Financial Assistance ■ MOAA has several cal- culators to help you determine your debt and how to pay it off. Visit our Web Base, www.moaa.org, and click on Financial Center (under Services) to use this members-only resource. id you run short of money to cover your holiday expenses? Maybe you did what many Americans do — charged it! Increasingly, American consumers of all ages are eschewing cash for the convenience and protection of credit cards, especially during the holidays. The explosion of credit card reward and afﬁnity programs, with everything from air miles and point-of-sale discounts to cash rewards, has enticed many consumers to carry more credit cards than ever before — and carry higher balances along with them. According to www.cardweb.com, a leading online information provider about credit card programs, half of all U.S. consumers carry a balance on their credit cards, with an average of $9,312 a household. This represents a doubling of credit card debt in the past decade, meaning potential trouble for consumers. Two recent changes in the law — making ﬁling Chapter 7 personal bankruptcy much more difﬁcult and requiring credit card issuers to double the minimum monthly payments from 2 percent to 4 percent — combine to make life difﬁcult for consumers struggling with high debt levels. If you spent more than your limit during the holidays and are facing big credit card bills, try following these three steps: ■ Start using cash or a debit card. Studies of consumer spending habits show that those using credit cards spend 15 percent to 20 percent more than those who pay with cash, debit cards, or checks. Consider putting away credit cards and just using cash until balances are paid off. Not only will you spend less, but also you won’t be paying big interest charges. And debit cards now offer the same fraud protection as credit cards if lost or stolen. ■ Pay more than the minimum. The average interest rate for both ﬁxed and variable credit cards is approximately 13 percent. This number will continue to increase as short-term interest rates go up. Making small extra payments can make a huge difference. If an interest rate is 18 percent, paying only $25 more a month than required will reduce the payoff time on a balance of $5,000 from more than 30 years to ﬁve years and two months, saving a whopping $9,863 in interest charges. ■ Watch your rates. Make sure you check your statement each month so you know what your rate is. If you’re not satisﬁed, contact the card issuer and request a lower rate. It costs a card issuer anywhere from $50 to $150 to land a new customer, so many will lower the rate substantially if you threaten to take your business elsewhere. Credit cards can be great ﬁnancial resources. Just remember to be cautious of too much of a good thing! MO — Former Army Capt. Phil Dyer, CFP, is deputy director for financial education, Benefits Information. For financial advice, members can contact Garrett Planning Network at (866) MOAA-GPN (662-2476) or www.garrettplan ning.com, or visit www.moaa.org/financialcen ter for other resources. PHOTO: GREG SCHALER 44 MILITARY OFFICER JANUARY 2006 http://www.cardweb.com http://www.moaa.org http://www.garrettplanning.com http://www.moaa.org/financialcenter http://www.garrettplanning.com http://www.moaa.org/financialcenter

Table of Contents Feed for the Digital Edition of Military Officer - January 2006

Contents Features Departments From the Editor Chairman's Page Board of Directors Nominations Your Views MOAA Directory Rapid Fire Washington Scene Member Books Financial Forum Ask the Doctor Chapter Activities Cover Story: On the Edge Storm Stories Our Brilliant, Bloody Future eXtreme Seniors Pages of History Information Exchange MOAA Scholarship Donors Advertising Index MOAA Calendar Sounding Taps MOAA Member Services Encore

Military Officer - January 2006

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