European Stars And Stripes (Newspaper) - January 15, 1988, Darmstadt, Hesse                                Credit users feeling a Pinch by Chet Currier associated Pressa s they try to manage their Money these Days Many americans can empathize with the Federal government 5 much publicized budget problems. Amid the seasonal hurry of Post Holiday Bills and lax documents individuals in Large numbers and Hal i Hoy too. Are running big budget deficits. Like the government they rely on borrowing to Linance the Gap Between their income and outlays. And like the government they Are coming to the realization that this is an expensive Way of operating that s especially True these Days because real interest Rales taking inflation into account arc quite High and because a tax break that amounted to a subsidy Tor borrowers is on the Way out in the 1970s and Early 19bd3, a Good Case could be made for borrowing Money even in you really did t need to double digit inflation mount that you would be paying Oil the principal in dollars that had much less value. Furthermore income tax rates were so High Hal Uncle Sam would in elect. Pick up the Cost Olas much As Hall your interest expense when you deducted in on your lax return. In recent years by contrast inflation has been running at less than 5 percent a year. So even a bargain credit card interest Laleff 13 to 15 percent carries a substantial real cos. In actuality Many credit card issuers Are still charging interest in the 18-20 percent Range. Under the tax Reform act of 19s8, the deduction for consumer interest is being reduced by stages until it disappears altogether in 1b9t. For the 19b7 tax year b5 percent of consumer interest remained deductible this year the percentage Falls to 40. Since tax rates have also been lowered the government is now less generous in he subsidy it pays for deductible interest. For most taxpayers in 1986. The deduction will to Worth no More than 28 cents on the Dollar against As much As 50 percent just a few years ago. All that adds up to a Strong incentive Lor individuals and family Money managers to examine their existing debts and their attitudes about future borrowing. The simplest approach to the problem might be to pay off All outstanding consumer debt As quickly As possible. Of course that s not a workable solution for Many people. Whal s More in too Many Consumers did that at the same Lime it would Deal a Shock to Iho Economy prompting a sudden drop in retail sales Bank earnings and a Good Many other areas of business activity. Still financial advisers say it would pay to find ways to reduce your consumer interest payments either by cutting Down on the amount of debt or by paying off existing Loans with new Loans that not 0at. We can k Wert thin