Prepare Now for Holiday Spending
The inflatable Santas are already on the shelves at Wal-Mart, giving an early warning that Christmas is coming. Even though it feels a bit early to think about that January credit card bill, now is the time to make your financial plan to control your holiday spending.
"Most households spend between $500-$1,000 during the holiday season," says Bill Hardekopf, CEO of LowCards.com. "If you add this amount to your existing credit card balance, you will be creating a steeper financial hill to climb. If you charge $1,000 on a credit card with an interest rate of 15% and just pay the minimum balance each month, it will take over 10 years to pay off Christmas 2007, and you will pay an additional $758 in interest."
Here are some tips to prepare for holiday spending:
* Start saving now. Look at what you spent last year and try to save that amount in the next two months. If you spent $500, you can save $50 per week for the next 10 weeks and afford everything you purchase. "Instead of eating out, take your lunch to work or eat more meals at home from now through December; save that money for Christmas purchases," says Hardekopf.
* Change your shopping habits now before you get into the spirit of the season. If you can't afford to pay off your credit card in October, then you can't afford to add a lot more to it. "It's Christmas" is not a good reason to put yourself deeper in the debt. "If you are still paying for purchases from last Christmas, then you can't afford a lot of shopping this Christmas," says Hardekopf.
* If you must use a credit card loan to pay for Christmas, make sure you can pay it off by Easter.
* Pay attention to your credit limit. "If you are close to your limit in October, you could have problems by December. The punishment for going over your credit limit is no longer a simple fee. You will have to pay the $39 over-the-limit fee, and your rate may increase to the default rate that can be as high as 32%," says Hardekopf. "More importantly, if you add to your balance and your credit utilization
goes much higher than 50%, you could hurt your credit score."
* If you are looking for a new credit card, this is a good time of the year to apply. If the card has a 0% intro rate for purchases for six or twelve months, you can use your card as a free loan for holiday spending. This is recommended only if you pay it off before the interest charges begin.
* If you really want to stick to your budget and avoid impulse spending, pay in cash. According to Dun and Bradstreet, people spend 12-18% more when using credit cards than when using cash.
"Consumers must start having a Christmas that they can afford. If you have the type of Christmas that is advertised by retailers, then you may have to work three jobs just to pay it off by next Christmas," says Hardekopf. "Debt can quickly tarnish the memory of a happy holiday season."
"Most households spend between $500-$1,000 during the holiday season," says Bill Hardekopf, CEO of LowCards.com. "If you add this amount to your existing credit card balance, you will be creating a steeper financial hill to climb. If you charge $1,000 on a credit card with an interest rate of 15% and just pay the minimum balance each month, it will take over 10 years to pay off Christmas 2007, and you will pay an additional $758 in interest."
Here are some tips to prepare for holiday spending:
* Start saving now. Look at what you spent last year and try to save that amount in the next two months. If you spent $500, you can save $50 per week for the next 10 weeks and afford everything you purchase. "Instead of eating out, take your lunch to work or eat more meals at home from now through December; save that money for Christmas purchases," says Hardekopf.
* Change your shopping habits now before you get into the spirit of the season. If you can't afford to pay off your credit card in October, then you can't afford to add a lot more to it. "It's Christmas" is not a good reason to put yourself deeper in the debt. "If you are still paying for purchases from last Christmas, then you can't afford a lot of shopping this Christmas," says Hardekopf.
* If you must use a credit card loan to pay for Christmas, make sure you can pay it off by Easter.
* Pay attention to your credit limit. "If you are close to your limit in October, you could have problems by December. The punishment for going over your credit limit is no longer a simple fee. You will have to pay the $39 over-the-limit fee, and your rate may increase to the default rate that can be as high as 32%," says Hardekopf. "More importantly, if you add to your balance and your credit utilization
goes much higher than 50%, you could hurt your credit score."
* If you are looking for a new credit card, this is a good time of the year to apply. If the card has a 0% intro rate for purchases for six or twelve months, you can use your card as a free loan for holiday spending. This is recommended only if you pay it off before the interest charges begin.
* If you really want to stick to your budget and avoid impulse spending, pay in cash. According to Dun and Bradstreet, people spend 12-18% more when using credit cards than when using cash.
"Consumers must start having a Christmas that they can afford. If you have the type of Christmas that is advertised by retailers, then you may have to work three jobs just to pay it off by next Christmas," says Hardekopf. "Debt can quickly tarnish the memory of a happy holiday season."
Posted by Lynn at
4:54 PM
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