Living with credit

12 Days of Christmas payoff? Decades!

Jeff Herman

If you put the partridge in a pear tree, two turtle doves and all the rest of the 12 Days of Christmas on your credit card, you’d have a whopper of a bill to pay off.

How big a bill? According to the 2016 PNC Christmas Price Index, the total tab for the birds, fowl, rings, maids-a-milking, ladies dancing, lords-a-leaping, pipers and drummers would be $34,363.49.

That’s up just 0.7 percent from the 2015 PNC CPI, with the biggest increase being the turtle doves, costing 29 percent more because of a shortage of the birds. Another reason for the increase: Musicians’ wages (pipers and drummers) caused those prices to jump 2.8 percent.

“We’re seeing some sign of wage gains,” says Thomas P. Melcher, chief investment officer for PNC Asset Management Group. It’s not across the board, though, as the cost to hire the maids-a-milking, the closest to a minimum-wage job in the group, was unchanged, he notes.

One of the surprises this year: Despite a rise in commodity prices and general volatility in the markets through much of 2016, five gold rings cost the same $750 this year as in 2015, Melcher says.

But how to pay off your holiday haul for your true love?

Minimum payment, maximum debt
If you send just the minimum on your credit card bill, you’d be paying off the 12 Days of Christmas for 408 months – that’s 34 years. Your monthly minimum payments would start at a high of $778.83 (based on a repayment of 1 percent plus the interest owed), and you would fork over $42,595.80 in interest during those 34 years.

To put that in perspective: You’d still be paying after the partridge, turtle doves, hen and calling birds have all died, the cows have stopped yielding milk, and some of the oldest maids, dancing ladies, pipers and drummers likely would have retired.

That’s just crazy, says credit coach Jeanne Kelly of the Kelly Group Credit Consulting. “Nobody wants a gift that puts someone into debt,” she says.

Instead of an array of expensive gifts, Kelly says experiences can mean much more. She says one of her dearest friends would put slips of paper in cardboard tubes, then wrap those up, as gifts for her children. On each piece of paper was a promise to do something special with that child.

Years later, when times weren’t so tough, Kelly recalls her friend saying her children missed the simple gifts and quality time. Her friend told her, “The things my kids liked the most are the times we spend together.”

Pay 12 equal payments, and nearly a payment in interest
Supposing you wanted to clear the debt decks by this time next year – maybe you want to be free to buy another 12 Days of Christmas gifts for another true love? – you’re looking at 12 monthly payments of $3,104.51. Figuring your card has an average interest rate of 15.18 percent (see our Weekly Rate Report for current national average), the interest alone on your purchases is $2,890.63.

With a December interest rate increase by the Federal Reserve increasingly likely, anyone carrying a balance on a variable rate credit card likely will be paying a bit more in the months ahead. “As interest rates go up, that’s something to factor into all of your credit card purchases,” Melcher says.

Minding one’s purchases on credit is important through the year but especially at the holidays, Kelly says. “You don’t want to have a January credit hangover.

“Credit is a great tool, if it’s used in a healthy way,” she says. “We all need gas for a car, a cellphone, groceries and cable.” As long as you can pay off all your charges every month, you can benefit from your credit card’s rewards and perks, and a good credit score will get you the lowest rates and best terms on loans.

With index, online shopping has added costs.
The PNC index’s sources include retailers, hatcheries, Philadelphia-based PHILANDCO and the Pennsylvania Ballet Company.

The PNC CPI index, now in its 33rd year, also is based only on traditional purchases in stores and locally. If you had ordered your 12 Days of Christmas gifts via Amazon, or a variety of online retailers, your holiday shopping spree would total $44,602. Apparently, convenience – shipping and delivery of the maids-a-milking, lords-a-leaping, drummers drumming, et al. – comes at a price.

For example, Melcher notes that contracting locally for 10 lords-a-leaping cost $8,000 in 2016, but booking lords online would set you back $13,400.

That’s not to say that there aren’t lower prices to be found online, he adds. Online or in store, it really depends on the shopper’s preference.

Would anyone be left to pay the bill?
Something to think about: That PNC Christmas Price Index is based on just buying one of the 12 gifts. If you deliver your gifts as in the “12 Days of Christmas” song, you would repeat the earlier purchases with that new day’s gifts.

Putting the total 364 gifts on your card, you’re looking at a “True Cost of Christmas” bill of $156,507.88 ($202,689.73 online) for the whole haul. Paying the minimum monthly payment on that supersized bill means it would take you 558 months, or 46.5 years, until payoff.

“At that rate, not only would the birds all be dead, but you might be too,” Melcher says.

Kelly would rather do without all of the 12 days of Christmas gifts. Simpler is better. “I don’t want a gift that puts someone into debt,” she says. “Your company is enough.”

See related: 2016 holiday shopping and credit guide9 tips for sticking to a holiday budgetDebt payoff calculator, Minimum payment calculator.

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