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Holiday time presents a challenge for anyone wanting to cut back on their expenses – for a lot of consumers, ’tis the season to overspend. However, there are a few strategies you can employ to make sure you don’t wind up with an overwhelming amount of debt in your stocking. Which, let’s face it, is worse than coal.
The first thing to do is to establish a budget before you start any shopping. If you have already begun purchasing gifts for your family and friends, don’t buy anything else until you have a budget in place. No matter what you do, stick to whatever spending limit you have set. It might be easiest to figure one out on a per person basis. Remember - a gift does not have to cost a lot to be meaningful for the recipient. Resist the urge to run out and spend a ton of money you can’t afford.
Here are a few other suggestions about how you can manage your debts throughout the holiday season:
Tackle your old debt first.
Should you be carrying outstanding balances on your credit card heading into the holiday shopping season, perhaps a balance transfer can help you out. Many different card issuers offer 0% APR on balance transfers for an introductory period of time – some for as long as 21 months. This would allow you to make some headway on paying down the amount you owe without it steadily increasing as a result of interest charges being tacked on every month. There are two important things to pay attention to when considering a balance transfer – how long does the promotional period of no interest last and how much is the balance transfer fee. Make sure that you can tackle the entire amount within the specified period of time, because after that the APR will jump considerably. Also, factor in any balance transfer fee to your final payoff amount. If the amount you stand to save in terms of interest exceeds the amount of the fee, then switching a balance from one card to another is well worth it.
Make sure, whatever you decide to do with regards to a balance transfer, that you are making your monthly payments on time and that you are paying more than the minimum amount as outlined by your credit card issuer. Making only the minimum payment each month will result in you paying exorbitant amounts of interest charges as it will take you a very long time to pay back what you owe.
Go online to go over your monthly statement.
Make a pre-New Year’s resolution to make a habit of signing onto your credit card account online to regularly inspect the activity being posted to your account. This is a good thing to do all year long, not just around the holidays although the occurrences of identity theft and fraudulent charges definitely spikes during Christmastime. Check to see that every charge to your account is a transaction you actually made. If you see something fishy or unfamiliar, call and report it to your credit card company immediately.
Your credit card is not a cash card.
Never, ever pull out cash on your credit card at an ATM unless it is an absolute dire emergency. The interest rate on cash withdrawn from your credit card account is much higher than what it is for purchases. Furthermore, interest begins accruing immediately upon making a withdrawal. Pulling out cash on your credit cards is a quick way to sink into insurmountable debt.