It's That Time Of Year Again: How To Avoid Racking Up Too Much Holiday Debt On Your Credit Cards
You could spend the entire year keeping your credit card use under control, only to be hit by holiday-shopping fever, where you spend way more than you should, threatening your budget, along with your valuable credit score. Avoid this potential catastrophe, by keeping your impulses under wraps and having a master plan to keep your credit in good standing.
Make A List Of Who To Buy What For, And Stick To It
It can be so hard to resist buying things as you see them, when they make you think of someone on your list; however, if you impulse-buy holiday gifts, you're going to end up with way too many for some people, while not having any for others. Of course, you'll end up spending a lot more money without a list, too. The best way to approach your shopping is to make a list of everyone you want to buy for, then categorize them by dollar amounts, limiting your spending according to your own criteria. Once the list is complete, check it twice, and add up the total amount you expect to spend. If the figure is astronomical and something you don't think you can swing, don't simply charge all the gifts on your credit cards. Instead, rework the list until the final tally can be absorbed by your budget.
Postpone Buying For People You Won't See Over The Holidays
If there are people on your buying list you don't expect to see until after the holidays, holding off on getting them gifts, so you can benefit from the post-season sales. You might be surprised at how significant the discounts are when the stores realize they haven't sold all their designated merchandise and that savings will translate into lower monthly payments on your credit cards, along with paying less in interest.
Postponing purchases might also give you a chance to find out what the people on your list received in the way of gifts from others, helping you to avoid redundancy with your purchases. Additionally, if you have a friend or relative who regularly gives you cash in lieu of a present, that money could go toward buying the rest of the gifts you need to complete your list.
Use The Credit Cards With The Highest Rewards And Lowest Interest
Once you're ready to set your holiday shopping plan in motion, carefully select which credit cards will work the hardest for you. For example, if you have one that pays you more cash back than the others, reach for that one before heading out in your sleigh to go shopping. On the other hand, depending on the terms, it might behoove you to use the card with the lowest interest rate, so you don't end up paying more that way.
The holidays can also be a good time to go ahead and use a card you have specifically for the purpose of building up your credit score. For example, spending around one hundred dollars, then paying it off promptly. You don't have to worry about an extra monthly payment or the added interest, but keeping the card active helps you establish yourself as a responsible card holder.
Cards that carry a minimum spending amount for you to be eligible for an end-of-year-bonus can also be very smart to use around the holidays, helping you to achieve that important minimum amount as you cross another recipient off your gift list. If you know anyone that has a hard time paying for their fuel every month, perhaps because they drive a gas-guzzler, you could buy them a gift card at a fuel stop, if you have a credit card that pays you back for buying gas. Some credit card companies offer special bonuses to customers for the first year they use a specific card, so check the fine print on your cards and see if you can't beef up your rewards by being a little creative with your gift-giving.
Set A Total Spending Limit, Not Just A Per-Card Max
Some careless shoppers set themselves up for a serious financial setback by maxing each card as they shop, rather than keeping their spending under a certain total number. Although your credit card companies aren't going to complain, so long as you pay them all on time, what you end up with are way too many super-sized monthly bills, combined with all that extra interest. It's important that you are aware of the current balance on each of your cards, as well as the spending limits, before heading out. If you have to, leave a card or two at home to avoid going overboard and sabotaging your financial self for the coming new year.
Consider Consolidating To One Credit Card With More Manageable Terms
If you don't even know how many cards you possess, what you owe on them or which one has the lowest interest rate, it's a good idea to sit down at your kitchen table and figure out exactly who's naughty and who's nice. Credit card debt can quickly spiral out of control, with the average American owing $4,717 on cards that charge 15% in interest fees. Crunch the numbers to see which card companies are working the hardest for you and give them a call. Tell them you'd like to consolidate your debt and down-size your inventory of credit cards, to act in your own best financial interest, as well as to be able to make the monthly payments in a timely manner. As long as you're in good standing with them, they should be happy to help you do the right thing, for all the right reasons.
No matter how much fun it is to buy for others this holiday season, you still have a financial life to manage the rest of the year. Plan your spending carefully and choose your credit cards wisely, because if you get too caught up in the shopping, you could end up paying a very high price, in more ways than one.