As the year is about to close, holiday credit card debt is a situation a lot of people find themselves in. The expenses they incur celebrating the holidays could just be too much for their finances. In your desire to feel the spirit of the season, you spend way more than your budget allows. You buy gifts for yourself and other people, go to see family or even travel for the holidays that you build up debt along the way.
If you did not plan for all these, you would quickly reach for your credit card and start using it to get through the holidays. As you do, you slowly accrue balance and end the year in the red. You start to feel anxious about receiving the statements at the end of the month because you know that you might not be able to pay it all back in one go.
You start thinking about holiday credit card debt because you know for a fact that you have just used your card more times than you can count. Receiving a statement that is more than what your income can cover at month-end is starting to become a possibility. This usually leads to paying only the minimum amount which results in higher payments over the course of time.
Business Insider shares that about half of millennials have credit card debt but remember that is not the reason why you land in debt during the holidays. In fact, credit cards can even help you improve your finances when they are utilized correctly. If you start relying on your cards to cover for your lack of preparation, you risk being in hot water. Your charges will start to incur to a point where you may not be able to enjoy the holidays anymore as you think about your debt.
Plan for the holidays
One of the best ways to prepare and stay away from holiday credit card debt is to prepare for the expenses early on. Preparation means having an idea of what you plan to do for the holidays. The reason why it is an expensive season is that there are a lot of things people can do during this time of the year and they all incur costs.
One of the most expensive decisions you can make during the holidays is to travel to a new place or to visit family. This usually means airfare and accommodations which does not come cheap, especially as the holidays are approaching. Plane tickets and hotel rooms usually spike up towards the end of the year as demand for them increases.
Holidays also mean gift giving and this can also put a huge dent in your finances especially if you charge everything on your card without careful planning. You could get lost with all the people you want to give gifts that you already hit your credit limit because of it. Planning for the holidays means knowing beforehand if you are going to travel or simply having a list of people you want to buy gifts for.
Save money for expenses
Once you have planned what you want to do during the holidays, the next step is saving money for them. This is one of the ways you can reduce holiday credit card debt and reduce your reliance on your credit cards over the holidays. The plan is to set aside money for the expenses you expect and maybe use your card for holiday emergencies if you do not have an emergency fund yet. This is important because The Fiscal Times shares that buying additional gifts are unexpected expenses that drive up holiday spending.
As you prepare for the holidays, list down what you want to do and put the appropriate expense beside it as well. If you plan to see your family, list down how much the travel cost will add up to and if you need to stay in a hotel, save up for that expense as well. It is also possible that you plan to travel with the family, you need to include activities or sights you want to see over the holidays.
If you plan to give out presents during the holidays, it is a good idea to have a list you can work from. Without one, you could be shooting over your budget and using your credit card as a result. If you have a list, it is best to put a dollar amount next to each name so you know how much you can spend per person. This could add a lot to the process but it will help you manage your finances better.
Use your credit card wisely
Incurring holiday credit card debt is not all that bad if you know how to make the most out of it. Paying with your credit cars can even help you improve your finances if you know how to use it. Lenders usually provide points or rewards every time you use your credit card and some even give you more if you use your card for specific expenses.
Before you go out and use the card for the rewards you will get, make sure that you only charge up to a point where you can pay it all back at the end of the month. The next thing you need to do is assign a card for a specific expense item. Not only will this make it easier to monitor the expenses but also allow you to earn more points or rewards.
If one card gives you huge discounts on airfare and hotel accommodations, use it when booking your travel over the holidays. In the end, it helps you get a discounted price for the plane ticket and even for your hotel stay. If one card offers you cash back, use it when buying gifts so you can use the rewards for other holiday expenses. Credit cards can be a great financial tool if you use it wisely.
Buy early
One possibility why you could be looking at holiday credit card debt is if you decide to do last-minute purchases. As the holidays get nearer, there is a good chance that prices start to climb up since demand will be on the rise as well. This is why you need to consider planning way ahead of time so you can save some money.
If you plan to travel for the holidays, it might help you to save money if you book your flights and room early before the holiday rush. This means a lot of early preparations from making sure you and your family’s work and school schedules are not affected by activities you will be doing while on a holiday break.
This can also be creating a list of people to give gifts to early on so you can start buying before the holidays. The idea is to not only save money but get the chore out of the way so you have enough time for other holiday-related activities. Once you finish with your presents early, it also lowers down your holiday stress knowing you are done with one part of it.
Personalize the holidays
Holiday credit card debt can be attributed to buying a lot of gifts for people around you but there is a way to help you save money. You try to look at how you can personalize your gift-giving based on your hobby or something you can create on your own. Not only will you save money but your gift will be a special one as well.
If you love to paint, create a portrait painting of the people you want to give gifts for. If baking is a hobby you have developed over the years, why not create special cookies for the holidays and give them out as gifts? The idea is to create something special and unique for the people around you which will also help you save money.
It is not ideal to incur holiday credit card debt but there are ways to avoid it or even tips to help you manage it well so you do not end the year in the red.
