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Christmas is a time of giving and receiving, but as we approach this most dangerous time of the year for credit cards, we’d like to give you a quick refresher on the best ways to use your plastic so you don’t end up with a Christmas hangover of the financial kind.
Time Doesn’t Cost Money
Christmas usually means getting together with family and friends, so instead of buying lavish gifts for each other, what about everyone in your family or group agreeing not to buy gifts this year and spend time having fun together? Or if that isn’t a popular idea, maybe each person buys just one gift for one other person. Suggest a limit is placed on how much each person spends to keep it manageable and fair. This way, you can enjoy the festive season without the stress of overspending.
Cash Advances Cost More
Using your credit card to withdraw cash will incur an interest charge immediately and at a higher rate than on purchases. There is no interest-free period on cash advances. If you must take cash off your card for an emergency, repay it as quickly as possible. Don’t wait for your statement. This will help you avoid unnecessary interest charges and keep your debt under control.
Rewards Programs Are Not Free
Credit cards with a “rewards program” come with an annual fee. This charge can be $100 or more per year, plus extra for any additional cards on your account. If you have a “rewards” card but haven’t been rewarded for your use in the past year, it might be a better idea to exchange your card for one without all the bells and whistles and no annual fee. Evaluate whether the rewards you earn justify the cost of the annual fee.
Read the Fine Print
Credit providers are required to state their terms and conditions in simple English, so it is a worthwhile exercise to read through these documents when you are shopping around for a new card or when you are advised of a change to your current service. A slight misunderstanding can cost you money or reduce the benefits your card was supposed to deliver. Make sure you understand the interest rates, fees, and any other charges associated with your card.
Plan Your Christmas Budget
Before you start your Christmas shopping, set a budget for how much you can afford to spend. Make a list of the people you need to buy gifts for and allocate a specific amount for each person. Stick to your budget to avoid overspending. Remember, it’s the thought that counts, not the price tag.
Use Credit Wisely
Credit cards are an excellent way to manage your Christmas buying. The secret is to keep a record of your spending so the statement isn’t a complete surprise and then pay off the full balance every month; otherwise, you could still be paying off this year’s gifts a year from now. If you can’t pay off the full balance, try to pay more than the minimum payment to reduce your debt faster.
Consider Alternative Payment Methods
If you’re worried about overspending on your credit card, consider using alternative payment methods such as debit cards or cash. This way, you can only spend what you have and avoid accumulating debt. Some people find it easier to stick to a budget when they use cash because it’s more tangible than a credit card.
Take Advantage of Sales and Discounts
Look out for sales and discounts during the holiday season. Many retailers offer significant discounts on Black Friday, Cyber Monday, and other promotional events. Plan your shopping around these sales to get the best deals and save money.
Avoid Impulse Purchases
Impulse purchases can quickly blow your budget. Before making a purchase, ask yourself if it’s something you really need or if it’s just an impulse buy. If it’s the latter, put it back and save your money for something more important.
Monitor Your Credit Card Statements
Regularly check your credit card statements to ensure there are no unauthorized charges. If you notice any suspicious activity, report it to your credit card provider immediately. Keeping an eye on your statements can also help you stay on top of your spending and avoid any surprises.
By following these tips, you can enjoy the festive season without the stress of overspending and ensure that your Christmas on credit doesn’t turn into a financial hangover. Happy holidays!
If you ever need to speak to a financial planner and require assistance determining your Christmas budget, reach out to our team of experts.
Read this great article on MoneyMag on how to get rid of Christmas debt.
