Black Friday: The day debt takes over

"Black Friday" is over, but that's only the beginning of the holiday shopping season. And that means it's only the beginning of a lot of trouble with debt for some consumers.

Black Friday is a great name for the start of holiday shopping not because it's the day that most retailers turn a profit for the year (which is actually no longer true), but because ominously, so many people doing their holiday shopping start plunging into credit card debt when the doorbuster sale ads start appearing.

Consider: The National Retail Federation said that holiday shoppers spent a total of $41.2 billion last weekend, with the average per-person being $343.31. That's less than the $372.57 per person consumers spent last Black Friday weekend but still, more people plan to use their credit cards for holiday shopping --28.3 percent -- than cash --about 25 percent.

Last year the numbers were worse, with more than 30 percent using credit cards for their holiday shopping. But think about it: even in this economy, even with credit card issuers jacking up rates sky high, nearly a third of consumers are buying holiday gifts on credit.

Since most people don't carry around as much cash as is available on their credit cards (and many don't even have that much in the bank). That makes it easy to overspend especially when every store you walk past has a sale going on.

So if you're shopping this year, try to live by two simple rules: 1) Make and stick to a budget and 2) spend it all in cash. If you can't pay for it up front, you don't need it, no matter how cheap it is.

Is your 'ideal mate" checklist keeping you broke?

I'm stealing today from another blogger. Adrienne Samuels is Ebony magazine's senior writer and someone I count among my best friends and favorite people on earth. Yesterday she blogged her take on the flaws with many young people's approach to coupling.

Why's that relevant to a blog about personal finance? Because like I've stated before, even in my own singleness I understand the connection between marriage and accumulation of long-term wealth. But Adrienne takes it a step further, drawing a connection between how you date and how you think about choosing a partner and your long-term wealth potential:

Look around at folks in their 50s, 60s and 70s. The reason why many of them...drive Cadillacs, have big houses, tithe thousands of dollars to church and can take fab trips to Athens or to Jamaica now that their kids are out of college is because they pulled their money together and made their finances WORK when they were a young couple.

Everybody wants the perfectly perfect mate with the perfect social status, income, car, home, brains and physical looks. Everyone wants to marry up. But guess what? Marrying up is a fairy tale ideal that doesn’t really translate well to today’s society. You want up? Get up there yourself.

One caveat to a point she made: Baby Boomers didn't all get the trappings of success because they married and worked real hard. Our parents' generation also left a legacy of messy, costly divorces and financed much of their lifestyles with credit, a legacy that we're all paying dearly for now.

Still, Adrienne's point holds. Too many people want for insta-fab relationships that come with all the luxuries of a romantic comedy where everybody lives fab and has no wrinkles (think The Best Man, "The Brothers"). She offers a much simpler, more workable approach:

Rather than looking for a rich mate, why not look for a mate to get rich with?

Read Adrienne's blog here.

College students' credit card debt soars

A comment to a previous post about college students and credit card debt inspired today's post. "Student" writes:

Credit card companies typically employ a very sly tactic in getting college students to register new credit cards. They usually give a very low interest rate for the first year. After the first year, the interest rate will begin to increase. Fortunately, since college students are still very young, their credit cards' limits are a lot lower than their adult counterparts who are in the corporate world.

You're absolutely right, and I'd add that credit card companies use many shady tactics to get students to sign up. In a previous post I wrote about how one of my college hustles was working a table giving away 'free' t-shirts to get students to sign up for credit cards. I got paid in cash and my classmates got shirts they never wore and a mountain of debt.

One thing I will challenge is your statement that students' credit limits are necessarily lower than working folks. It is true that students have lower incomes and should have been given very low credit limits but lending standards were so lax for so long that many students left school with just as much credit card debt as working professionals. College seniors with at least one card last year graduated with an average of more than $4,000 in credit card debt.

Nightly Business Report & a Question About Credit Cards

My appearance on Nightly Business Report went well: I took credit card companies to task for their arbitrary rate hikes and challenged the notion that they're good for the bottom line over the long-term, especially if consumer confidence is damaged.

I couldn't embed the video, but click here and scroll to the 22:30 mark to watch my commentary.

In the meantime, my twitfam had questions sparked by the commentary. @futurechefbelle asked, "What do you recommend a student to do as far as credit cards are concerned? Should we wait for the economy to bounce back?"

Answer: Most people should have a card for STRICTLY emergencies or when you absolutely need one. Even some discretionary activities like renting a car or a hotel room or even getting an airline ticket are hard to do without a card.

Keep in mind that credit cards in and of themselves aren't evil, (although @grahamesq tweeted me this gem: "My dad has been preaching to me since I was about 8 that credit cards are 'economic suicide' "). What is evil is the abusive relationship most of us have with our cards, buying things we know we can't afford under terms we know are to our disadvantage using money we borrow from modern day corporate shylocks.

You can, and probably should have a card, but like insurance, it's something you want to have but rarely, if ever need to use.

Jacked up rates: Reason #1 to pay off that credit card

When I decided to challenge you to get rid of all your credit card debt, I had no idea that the banks would hand all of us a built-in motivator. But they have: jacking your interest rates up sky high for no reason.

Months ago, a few stories warned that these kinds of rate hikes were coming but at that time I didn't know anyone it'd happened to. But now? Just this morning, I asked the question on Twitter and within three minutes, three of my followers said that their card issuers had jacked up their rates without warning and with little explanation.

That's not counting the real-life people I know: one whose rate was kicked up 14 percentage points though he's paid on time for four years; another with a FICO score above 800 who got a note saying her rate was climbing to a whopping 37 percent. Yes, 37.

I point all this out to answer the question I got from friend who wanted to know if he should pay off his $1,300 Citibank Visa balance. Though he recently lost his job, he and his wife have significant savings. Should he pay the balance off completely or pay half of it?

In most cases, I'd argue pay just the half: the balance isn't that high and being unemployed, you want to preserve cash. But with banks killing cardholders with rate hikes, keeping any credit card balance that you can otherwise pay off is too risky, especially if you have enough cash on hand to pay it off and still have significant savings left over. Since your wife is still working, cut back on other kinds of discretionary spending and make the single income work for as long as you can while looking for a job, but pay that balance off!

And that goes for the rest of you: this is NO time to be keeping a credit card balance. The banks have shown that their bottom line is the bottom line. They've taken all the bailout money we gave them from our taxes and paid us back by taxing us more via higher interest rates. They ain't playin', nor should you be.

Today on Nightly Business Report

Today I'm taping a commentary for Nightly Business Report, which airs nationally on PBS (click here to find out your local airtime).

I'll let you know when it's scheduled to run, but until then, you can read what I have to say below:

I've got a deal for you: I'll buy you whatever you want, no questions asked. Just pay me back over time, plus a little extra for my trouble.

Make that a lot extra. American consumers are saving a decent percentage of our incomes for the first time in decades but those savings could be overtaken by payments on our consumer debt given the arbitrary interest rate hikes being imposed by our friends, the credit card industry. I say "friends" because taxpayers have given credit card issuers billions in bailout money and I tend not to give money to people I don't like. You'd think they would be decent enough to let us off the hook for some of what we owe them.

Instead, they're slapping around people like the guy who emailed my blog complaining that he hadn't missed a payment in four years but still wound up with a 14 percentage point rate hike on his Visa card.

Not that consumers are innocent; I just finished paying off a $9,000 credit card bill from stuff I bought too long ago to remember. Still card issuers need to consider whether slamming already strapped consumers is really good for business. The economy wont fully recover until consumers are confident enough to spend, which fuels the credit card business. I don't know about you, but having a card in my pocket and an anvil over my head doesn't make me feel all that confident.

I'm Keith Reed.

Uptown magazine publisher talks about getting what you want

I believe in learning from everything, particularly my own mistakes. But when it comes to accomplishing my vision for my own professional and financial life,nothing quite puts my experiences in context like hearing from people you admire or who have done things that you haven't.

So as you head into this weekend, check out this video where my mentor, Sakina Spruell (on twitter) and Uptown Magazine publisher Jocelyn Taylor about being smart and getting what you want. (Note: embed link for this video wasn't working, so to watch, visit www.northstarnews.com. I'll fix later.)

Have a great one and see you next week.

It's Payday!

Not literally, but that's the name of a radio show I taped last week. The host, Zachary Rinkins (on twitter here) is a phenomenal young business journalist who's hustled enough to get his own show on air. We talked for about an hour about how the recession has affected young professionals and young people should be doing to find the best opportunities in a continued downturn. Check it out.