How to Steer Clear of Credit Card Debt
December gets more expensive every year. As temperatures drop, heating bills rise. On top of everyday expenses, the average US citizen is expected to spend more than $700 on the holidays this year.
How to Steer Clear of Credit Card Debt Here
Debt is a real concern around the holidays, especially since many folks are still paying for gifts they put on credit last year. As you shop, remember that your loved ones wouldn’t want you to face financial distress on their behalf. There are a few precautions you can take to avoid debt when it comes to holiday shopping.
You may be waist-deep in holiday shopping, but its never too late to draw up a budget. Take stock of what you’ve already spent and come up with a reasonable budget. List the presents you have to buy and figure out how much you can spend without going into debt.
Make staying in your budget a priority. If you have a smartphone, take advantage of a budgeting app. Consider: – Mint – Expenditure – Money Book.
Don’t enter a store without the list you made with your family. Stick to it regardless of sales or alternative ideas you come across. This includes stocking stuffers. If they’re not in the budget, don’t go into debt for a few knickknacks. If possible, avoid buying gifts on your credit card or a store credit card. The interest financial institutions charge means that the longer you wait to pay off your purchase, the higher finance charges you end up accumulating in addition to the original amount you charged. If you absolutely must use a credit card, be sure to pay your bill before the billing period ends. Putting presents on a credit card also means you run the risk of lowering your credit score. Typically, if you use more than 30% of your credit limit, your credit score will take a hit. The best way to avoid using a credit card? Carry cash only. As an alternative, consider using a rechargeable card that you can load with the cash in your holiday budget. When the card runs out, stop shopping.
Consider Alternative Gifts
A simple way to lower your expenses and avoid holiday crowds is to give an experience as a gift. Consider giving a loved one a trip to a favorite landmark, admission to their favorite museum, or an amazing meal.
After the Holidays
As the festivities wind down, stay frugal. If you incurred debt over the holidays, it’s important to pay it down as quickly as possible. Any extra money after necessary expenses should go towards reducing debt. For example, if you return unused purchases, put the cash towards your credit card bill. Track your progress as you repay your debt. Remember, the sooner you repay your debt, the less money you’ll owe in the long run.
Planning for Next Year
Even if you aren’t able to stay out of debt this holiday season, consider it a learning experience. Consider starting a savings account in January. Some financial institutions offer Christmas Clubs – savings programs that deduct small amounts automatically from your paycheck and deposit the money in an account. Interest will accrue at a standard savings rate. You can withdraw the accumulated savings in November or December. It’s one way to avoid debt around the holidays.