
The
holidays can be an expensive time of year, and it's tempting to turn to plastic
to finance the whole thing. Consumers are planning to spend more this year than
last year, with only 24% of Americans planning to reduce their holiday
spending. Regardless, the average American plans to spend $812 on the holidays
this year, and that's more than most people have just sitting around or in
their savings.
In the
spirit of the holidays, let's look at some "naughty" and
"nice" ways to use your credit cards. Be sure to stay on the right
list, or there may be coal in your stocking - and smudges on your credit
report!
Naughty:
Financing gift-giving with credit
If you
don't have the money sitting around to finance your gift-giving, it can be
tempting to pull out a credit card at every store and shop 'til you drop.
That's exactly what most people do when spending with credit. A recent study of
consumer behavior found that people spend nearly 20% more when shopping with a
credit card. The dissociation between plastic and money can erode our
ordinarily thrifty impulses, causing us to overspend.
There's
also interest to contend with. That $812 could easily turn into $1,000 or more
thanks to the power of compound interest. Even deferring payment for a month
can cost you quite a bit! Less than a third of Americans pay off their holiday
credit card bills immediately. Most will end up carrying a balance that can
make it hard to start the new year right. In fact, consumer counseling agencies
see a 25% increase in requests for help in January and February. Holiday
spending can be the last straw for people barely getting by while making
minimum payments.
Oh,
and by the way, you might end up ruining the surprise on Christmas morning! If
you put something special for your someone special on a joint credit card, they
might see it on the credit card statement. Nothing ruins a perfect gift like a
spoiled surprise.
Nice:
Paying for holiday travel
If
you're traveling for the holidays, it can make sense to use credit cards. Most
major credit cards offer insurance for rental cars and extra cancellation
policies for flights in case things change at the last minute. Using a credit
card to make reservations at hotels, rental agencies and other book-ahead
services can also prevent the company from placing a hold on your account as a
deposit.
Remember
to make a clear budget for your travel plans and stick to it! Resist the
impulse to take frivolous upgrades. Holiday travel is a chance to bond with
family, and fancier hotel sheets won't help with that! Keeping a clear budget
will make sure you can pay off that credit card bill next month and avoid
costly financing charges.
Naughty:
Guilt spending
The
holidays are full of messages that connect spending to caring. These messages
would have us believe that, if you love someone, you'll get them jewelry or
another extravagant item. Advertisers encourage consumers to make emotional
decisions about spending, rather than looking at what they can afford. Credit
cards make this even easier by letting you postpone paying for the gift.
Instead
of telling someone you care with borrowed money, show them you care with a
thoughtful message and a reasonable gift that's based on what they want. Don't
buy into the myth that dollars are a meaningful quantification of your
feelings. Give sensible gifts with money you have.
Nice:
Spending rewards on holiday purchases
If you
use a rewards card throughout the year, now's a good time to cash those points
in. Most companies offer discounts on two commodities everyone needs this time
of year: travel and gift cards. You can use your rewards money to help absorb
some of the impact of gift-giving. Picking up gift cards this way can make
last-minute gift-giving easier.
It
might also be worth investigating the possibility of giving travel points or
miles directly to others. This can make a difference for relatives who travel
frequently, or make a trip home feasible for people who live far away. Look
into using your rewards generously this year!
Your
Turn: How do you manage your holiday
spending? Are there secret tricks to keep those costs down, or are there
techniques you use to keep you within budget? Let us know in the comments!
SOURCES:
http://abcnews.go.com/Business/story?id=88539&page=1
http://moneyqanda.com/spend-wisely-with-credit-cards-this-christmas/
http://www.moneymanifesto.com/use-credit-card-rewards-to-pay-for-christmas-2376/
https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/
http://www.daveramsey.com/blog/credit-free-christmas
http://abcnews.go.com/Business/story?id=88539&page=1
http://moneyqanda.com/spend-wisely-with-credit-cards-this-christmas/
http://www.moneymanifesto.com/use-credit-card-rewards-to-pay-for-christmas-2376/
https://www.nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/
http://www.daveramsey.com/blog/credit-free-christmas