What's a shopper to do when the holiday gift list and the checkbook balance look like they belong to two different people--one with unlimited dreams and the other with quite limited means?
The easiest remedy is to reach for a credit card--charge it today and worry about it tomorrow.
But that is often the riskiest remedy, personal finance experts say.
Consider Tom and Laura Hunter of Huntington Beach. In 1982, their middle son, then 8 months old, contracted bronchial pneumonia, complicated by recurring bouts of asthma.
For the next 6 years, the family debts mounted, fed by medical bills from the boy's chronic illness and pushed to the limit by automobile trouble and overuse of credit cards. Laura, who stayed home with her three children, said their medical coverage and Tom's salary could not cover their financial liabilities.
For a while, the Hunters--who asked that their real names not be used--continued to make regular payments on their credit accounts, Laura said. But in 1985, she discovered that Tom was soliciting new credit cards from financial institutions throughout the country.
"I didn't realize he was sending away for those to pay off the other cards," Laura said. "I found out when the creditors called."
Before Laura knew it, she and her husband had 21 cards--dangerous pieces of plastic representing accounts that ranged from the Broadway department store to Visa. They owed $43,000 on their credit cards alone.
"When we came down to the holidays, we didn't have much money available to us," Laura said. "All we had were credit cards. That's mainly how we spent for Christmas--credit cards, whether we had the money or not."
Earlier this year, Tom and Laura Hunter signed up for credit counseling, and they are now living on a strict budget. They are sending most of their income off to their creditors and live "day to day, week to week."
"We filed our tax return late and have some money coming," Laura said. "I'll save some from that hopefully to pay for Christmas and for the creditors. Otherwise, it will be really rough."
According to the Federal Reserve Board, the amount of outstanding credit card debt nationwide was $179.1 billion as of Sept. 30, the most recent month for which statistics are available. That number is directly tied to the estimated 800 million credit cards in circulation throughout the country. About 186 million of those are bank cards; the rest include department store and gasoline credit cards.
Although the Federal Reserve Board does not calculate consumer debt by county, credit experts contend that heavy debt problems are increasing in Orange County and throughout the nation.
The National Foundation for Consumer Credit, based in Washington, counsels debt-plagued families nationwide. According to Ken Scott, foundation spokesman, the average family who comes to his organization for help is $10,000 in debt.
In contrast, Orange County's higher incomes and standard of living push the average debt for a family seeking help closer to $20,000, said Carl Lindquist, president of the foundation's local chapter, which is called Consumer Credit Counselors of Orange County.
"It's higher for my clients here than in San Diego or Los Angeles," Lindquist said. "The average income here is higher than almost anywhere else."
In 1986, the Orange County median family income was $41,537, while the median family income nationwide was $29,458. In 1987, the Orange County figure rose to $43,264; recent national statistics were not available.
Through more than 300 offices nationwide, the National Foundation for Consumer Credit helps families figure out how much they owe and to whom and assists those families in working out a budget.
There is no charge for counseling. A small fee--based on the client's ability to pay--may be charged if the foundation devises and administers a debt-repayment plan. Appointments can be scheduled at the Santa Ana office by calling (714) 547-8281.
In fiscal 1985, the foundation's member offices counseled 126,714 families throughout the nation and helped them return $117.2 million to creditors through stringent repayment plans, Scott said. In fiscal 1987, the number of families helped jumped to 176,714, and the amount of money returned rose to $186.5 million.
Lindquist's Orange County office counseled 1,533 families in 1985 and helped them return $1.5 million to creditors. By 1987, the number of families rose to 2,230, and the amount of money returned more than doubled to $3.1 million.
While the telephone book is filled with pages of financial advisers, the only nonprofit help available in the area is the local branch of the National Foundation for Consumer Credit, Lindquist said.
For the consumer with little discipline and no personal financial plan, credit cards and holidays mix about as well as drinking and driving. Even the most responsible credit-card users can go a little crazy come December.