The holidays will soon be upon us and with the holidays comes holiday spending or in some cases overspending. We all like to give gifts and sometimes we get carried away. It just feels so good to see all those big smiles as people open our gifts. But then comes January and those credit card bills. Those statements can really be a pain. But there are some strategies you could use with your credit cards during this upcoming holiday season and here are four of them.
#1: Pay all statement balances each month
You’re always better off if you can constrain your holiday spending to whatever amount you can pay off in full each month and on time. This generates several benefits. First, you would not have to worry about high interest rates because you’re not accruing any interest at all. Second, you would enjoy an interest-free grace period on all your charges that would be 20 to 50 days depending on when you charged the item in your statement cycle. If you play your cards right, this could give you nearly two months of credit at zero interest cost.
#2: Don’t get new credit cards
If you find that you must carry a balance, make sure you continue to use your normal credit cards so that you would be incurring interest charges at the usual rate. Applying for new credit cards will not only harm your credit score but can come with very high interest rates. For that matter, if your credit score decreases, your interest rates will increase. Carrying a balance forward may be acceptable so long as you can pay it off within the next several months. But whatever you do don’t miss a payment. Missing just one payment on one of your credit cards could lower your credit score by as many as 60 points. And this could drop you from having “good” credit to “poor” or even “bad” credit.
#3: Look for a 0% interest balance transfer card early next year
If you find you’re over your head in credit card debt, apply for a 0% interest balance transfer card early next year. If you can qualify for one of these cards, you won’t have to pay any interest for anywhere from 6 to 18 months – depending on the card. This would give you a sort of timeout period where all of your payments would be used to reduce your balance, which could help you get caught up on that Christmas spending. However, make sure you understand that new credit card’s terms and conditions. Some of these cards charge a 3% fee on the amount of debt you transfer. If you were to transfer, say, $5000 to a 0% balance transfer card, this could cost you $150. This is something to just be aware of.
Get that promotional credit card offer before the holidays.
If you feel you will be creating debt over the holidays, you could apply for one of those 0% credit cards that have interest-free financing on new purchases for some period amount of time. Just make sure there is no balance transfer fee. That way you could carry a balance, while avoiding both balance transfer fees and interest charges. Because these offers can last as long as 18 months, you could potentially finance your purchases for this holiday season and the next one as well.
Which of these makes the most sense?
As any expert will tell you, the best way to use a credit card is the pay off your balance in full every month. If you do this you’re using your credit card as a helpful method of payment and not as a way of finance or to create debt. Beyond this, the 0% interest balance transfer cards can make sense if you can pay off a portion of your debt each month before your promotional period expires.
Keeping that holiday spending under control
It’s also important that you try to keep your holiday spending under control. There are several strategies for doing this as well.
First, you should set a limit on your total holiday spending. Determine what it is that you can afford to spend, combining both the cash you have in hand and what you can afford to put on your credit cards. Then stick to that limit.
Second, create a budget based on your own finances and not what it is you would like to do. The people on your list will probably appreciate the less expensive presents you buy them as much as more expensive stuff. It’s definitely true that it’s the thought that counts.
Make your gifts
There’s just nothing that beats a homemade Christmas gift where you’ve not only put thought into it but your time and efforts as well. Anyone can buy a Christmas gift. But it takes a special person to make them. It’s also great to give personalized gifts. Instead of shopping at those expensive, trendy shops, take a moment to think what the people on your list could really use. As an example of this, suppose you have a friend who loves to bake but can’t seem to ever do homemade piecrusts right. You might buy her an inexpensive pastry-making tool for less than $10 and then wrap it up with a copy of some foolproof recipe. You can just imagine how much she would love the gift and yet you’ve spent next to nothing.
Collect coupons and coupon codes
You may be able to find some very good sales before the holiday season, especially those legendary Black Friday sales. But there are other ways to save money on your gifts. For example when you’re shopping online, first do a quick web search for coupon codes that you could use on your favorite online stores. Also, comb through the coupons you receive in your mailbox before hitting the mall. Don’t forget to comparison shop. It’s possible save anywhere from $10 to $100 on an item just by watching out for deals. Speaking of which, here’s a video loaded with good tips for shopping online.