How To Avoid Holiday Credit Card Debt

Credit cards are convenient, easy to use and if you don’t have control of your spending – lethal to your bottom line. As the holidays approach, the overuse of plastic can lead to a hangover that won’t go away after New Year’s Day. What can you do to stop it? The answer is plan early and be careful later.

It’s a lesson student Jermaine Montaut learned the hard way. “I started about two months ago. Every paycheque I take about half my paycheque and I keep it aside for family, friends. If I didn’t do that, I would be spending like crazy and I wouldn’t have any money left for Christmas.”

What can you do avoid temptation? Here are some hints from the experts.

Carry cash
It sounds radical and it can invite thieves. But putting everything on plastic is too easy. Paying cash for the bulk of your purchases can make it easier to keep track of what you’re buying – and how much you really have left to spend. Plus it’s harder to go into debt if you pay cash. You either have it or you don’t.

Set a budget
Figure out how much you can afford to spend and stick to it. Don’t go over, no matter what the temptation or the sale.

Choose sensible gifts
Not everything has to be the latest and most expensive video gadget or MP3 player. A good gift doesn’t always mean an expensive one.

Include me out
The famous malaprop from movie producer Sam Goldwyn perfectly fits this instance about buying items for yourself. You may wind up spending more than you intended and not have enough left over for other gifts you need for family and friends, sending you further into a debt spiral. Let them give you the presents – or at least wait until Boxing Day bargains hit to look around.

Beware of sales gimmicks
Sometimes the offers of two for one or half off are loss leaders to get you into the store. And there’s often fine print attached. You also might wind up spending more than you intended because you think you’re ‘saving’ so much money.

Check online
Not only will you save gas, you can also comparison shop and sometimes find what you’re looking for at a cheaper price. Don’t forget to factor in shipping costs.

Switch before you fight
Look for credit cards that offer you lower interest rates, allowing you to save money if you do fall behind. “Rates here are as high as 18 or 19 per cent,” points out Paul Thornton, a financial advisor with Northern Securities. “Why not move it down to around 5 per cent or better while you’re still trying to pay it off?”
 
Check for a sale
Some stores offer you cash back if you paid for an item and it goes on sale after a specific period of time. For more on how to be notified about this by email, click here.

If you do run into trouble the Credit Counselling Service of Toronto offers free advice to get you on your feet again. Find out more about them here and use their online credit calculator to figure out how deeply in the hole you aready are.