3 Smart Credit Tips to Avoid Piling on Holiday Debt
Every year, the holidays put enormous pressure on your budget. If you aren’t scrimping and saving throughout the year, it’s easy to put all the festivities on credit.
Last year, one in three merrymakers spent, on average, more than they could afford, adding $1,249 in debt. Many regret the previous year’s purchases, as they’re still paying off their credit cards, lines of credit, and short-term personal loans. If you are in an unmanageable financial situation, an affordable debt relief solution can offer the assistance you need to regain control and achieve economic stability.
3 Smart Credit Tips to Avoid Piling on Holiday Debt
This year, inflation makes holiday shopping without dipping into credit harder than ever. But there are ways to sidestep debt while celebrating the season.
Know Your Limits, Spend Within It
A common rule of thumb floating around the Internet is to spend roughly one per cent of your gross annual income on gifts and goodies. However, you can still rack up debt following this rule if you don’t know your budget.
Before making a list and checking it twice, you should get intimate with your budget. Examine your available expendable cash to determine how much you can afford to spend this holiday.
Review your projected spending this season and cut any unnecessary expenses, putting subscriptions and other non-essentials on hold. This can free up more cash to put towards the festivities.
Use Your Credit Like It’s Cash
It’s unrealistic to expect you to swear off credit altogether this year. Sometimes, a credit card is the only way to snag an affordable deal online. Many airlines, hotel chains, and rental car companies also require it for booking and insurance purposes.
If you use the plastic in your wallet, pretend it’s cash. Only charge what you can afford to pay off by your billing statement’s due date.
While relying on the minimum payment to get by might be tempting, this isn’t an effective way to pay off debt. The minimum payment can extend how long you pay for the holidays because it adds interest and finance charges to these expenses.
The financial experts at MoneyKey also recommend following this rule with your line of credit. Paying off as much of your balance will free up your credit limit if you need help in an emergency this holiday season.
Cash into Benefits
If you must use a credit card anyway, you might as well take advantage of all the perks that come with it. Many card companies offer card-linked discounts, and if you purchase from an affiliated retailer, you can get 10–50% off your gifts. Don’t forget to redeem points if your card has these rewards.
Start Saving Earlier for Next Year
If your budget is tight, you might be disappointed with your spending limits this year. These negative feelings make you think celebrating on a budget is hopeless.
Once you’re in this state of mind, overusing your credit card or line of credit is as tempting as a second helping of turkey on the big day.
Before you tap into these accounts, remember they’re designed to act as a safety net in unexpected emergencies. Since the holidays arrive roughly at the same time every year, nothing is surprising about the festivities or their cost.
Next year, add festive spending to your annual budget. Starting in January, you can set aside some cash, compounding your holiday fund with each month you contribute. By the end of the year, you’ll have the money to use on the festivities without changing your everyday spending or misusing a line of credit.
