Plus: The worst ideas for accessing holiday money
Media Contact: Barbara Fornasiero; EAFocus Communications; barbara@eafocus.com; 248.260.8466
Wyandotte, Mich. — November 14, 2024 — Tempted to tap into your home equity this holiday season to treat the family to a special vacation or other expensive gift? Don’t do it! That’s the advice from Michigan Legacy Credit Union CEO Carma Peters.
“Home equity should be guarded very carefully. It’s a reward a homeowner builds up over time to ultimately pay off a mortgage and should never be tapped into for non-essential wants such as holiday or birthday gifts,” Peters said. “Legitimate reasons to tap into home equity include emergency repairs on a home, such as when a roof has sustained significant damage or a furnace breaks in the middle of winter and needs to be replaced.”
So, how can gift givers spend wisely this holiday season? Peters offers the following tips:
- It’s easy to be generous with so many lovely gift options to tempt us! Create a budget for gifts and divvy it up by individual recipient. Don’t go overboard on a gift for one person and throw your budget off by having too little left for others on your list.
- Shop online sales and comparison shop, finishing up your shopping as early as possible to maximize sale prices and inventory. Waiting too long means fewer options are available, even if the price might be lower.
- If the balance can be paid off each month, use credit cards that provide cash-back or some other type of benefit. But don’t pay extra fees for credit cards offering benefits that are never used.
- Know the cost of credit! Store credit cards may charge as much as 32% in interest on unpaid balances. Credit cards issued by a credit union cannot exceed 18% in interest per national credit union regulations. A purse purchased for $100 with a retailer’s credit card can actually cost as much as $392.88 if it’s not paid off when the bill arrives, and paid over the full repayment length of the credit card.
- When your holiday shopping is finished, leave major credit cards at home if heading to a retail center. Bring cash for coffee or a treat to enjoy the holiday festivities without making additional gift purchases.
- While it’s likely too late for this year, consider the old-fashioned Christmas account still offered at certain financial institutions, including MLCU. In saving year-round, the temptation to overspend can be lessened by such accounts, given their explicit purpose.
While home equity loans are a bad idea for accessing holiday cash – there are others, too. Peters warns against payday loans and buy now pay later alternatives.
“Fast cash is an expensive loan option. If you really need a loan, discuss lower interest options with your financial institution,” Peters said. “But loans for holiday gifts are not recommended.”
About Michigan Legacy Credit Union
Michigan Legacy Credit Union (MLCU) is a member-owned, not-for-profit financial cooperative serving members who live, work, worship, attend school, or own a business in the state of Michigan. Michigan Legacy Credit Union is committed to providing quality financial services at a competitive price, delivered professionally and efficiently while keeping member/owners and their needs first. For additional information on MLCU, visit: www.michiganlegacycu.org.
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