FOR SOME consumers, there are two seasons each year: December, when big holiday purchases are made with credit cards, and January through November, when credit card bills are paid off.
The two-season year may apply to a majority of credit card users, since industry statistics show that more than two-thirds of all credit card holders carry a balance from month to month and do not pay their bill in full.
That sad comment on the state of America's consumers means a lot of people are paying a lot of interest to a lot of card issuers.
Card issuers make it all too easy for users to stretch their debts out forever.
The average credit card has what appears to be a very liberal minimum repayment schedule, usually something like 2 percent of the average daily balance, or a minimum of $15, whichever is higher.
That would mean the minimum monthly payment on a $1,000 balance would be $20; on a $2,000 balance, it would be $40.
Should you regularly make just the minimum monthly payment on your card? Absolutely not, says Marc Eisenson, author of "The Banker's Secret," a book that shows mortgage holders how to save money by prepaying their loans.
The minimum payment schedule can stretch your credit card debt out for 30 years or more, he says. During that time you will pay huge interest charges -- $20 dinners you have charged will end up costing $90 or more, Eisenson says.
However, there is a way out: Card holders who add relatively small amounts of money to their minimum monthly payments can shave years and thousands of dollars off their credit card bills, he says.
Eisenson recommends that card users follow the same prepayment philosophy that he has promoted for mortgage holders.
On a mortgage, when you add some money to your payment, that extra payment reduces the principal you owe. Reducing the principal you owe also reduces the interest you will have to pay, as well as the number of months and years before your loan is paid off.
It is an attractive way for many homeowners to build equity, reduce debt and obtain financial freedom. However, the concept is not for everyone, financial planners say.
Mortgage holders with low interest rates might employ their money elsewhere. Cash sunk into a house is hard to get out when needed. Besides, there are tax advantages to paying mortgage interest.
None of those objections applies to paying credit card debt early. The average credit card interest rate in Buffalo is about 19 percent; you would be hard pressed to find a competing investment that would earn a better rate of return.
After Dec. 31 there no longer will be any tax advantage to paying consumer interest -- the meager deduction now allowed for consumer interest will be eliminated.
Prepaying a credit card debt can be as simple a matter as paying $3 extra a month, or 10 cents more each day, Eisenson says.
"When I ran the numbers it suprised even me," he said. "What got me the most is that you can save money by setting aside just 10 cents a day. It's hard for me to imagine anyone who can't come up with 10 cents a day."
Here is an example: Suppose you have a $2,000 balance on a credit card with a 19 percent interest rate. If you make only the minimum monthly payment (assuming the minimum payment is 2 percent of the average daily balance), it will take 27 years and 11 months to pay off the card, and you will pay a whopping $5,497.80 in interest charges.
If you add just $3 a month to each payment, you will chop $1,942.78 off the interest charges and reduce the repayment period by nine years and 11 months, Eisenson says.
Adding $25 a month will save you $4,466.57 in interest charges and reduce the repayment period by 22 years and seven months.
You can see how this works by looking at a payment schedule for the same $2,000 balance. The first required minimum payment will be $40 (2 percent of $2,000).
Of that $40, you will be paying $31.67 in interest charges and only $8.33 in principal. The second scheduled payment of $39.83 would include $31.53 in interest and $8.30 in principal.
Now suppose you add $8.30 to your first payment. It would be applied to your principal balance and wipe out that second schedule payment, along with the $31.53 in interest you would have paid.
That investment of about $8 would yield four times that amount in interest charges saved -- not a bad investment.
The same principle can be applied to other open-ended loans, such as home equity lines of credit.
Eisenson's newsletter, published in Elizaville, N.Y., contains lots of good information on loan repayment strategies. For more information, call his toll-free number, weekdays before 5 p.m. The number is 800-255-0899.