Can you believe the holidays are here?! It seems like 2015 went by in the blink of an eye. While the holidays are a time of rest and relaxation, they shouldn’t be a time of overspending. It can be easy to get caught up in the holiday cheer and let your spending get out of control. Borrowing from our education centre post on managing credit responsibly, here are some tips to avoid an unpleasant surprise when your credit card statement arrives in January.
1. Live within your means: Remember the number one rule of successful personal finances when holiday shopping: live within your means. Before your swipe your credit card and fill your shopping cart full of gifts, make sure you can afford what you buy. Your wife may appreciate that Tiffany bracelet, but she won’t be so appreciative when she sees the credit card statement in January.
2. Track your spending: Some people seem to conveniently forget the rules of personal finance apply year round, even during the holidays. Keep track of what you spend during the holidays. That way you’ll be less likely to carry a balance on your credit card. Regularly review your credit card statement online to make sure you’re not setting yourself up for a shock when your statement arrives.
3. Have a plan: Similar to how you should have a plan in life, it’s equally important to have a plan for your money. Be sure to include holiday gift giving in your budget. Plan ahead of time how much you’d like to spend and how you’ll pay off your credit card balance. By planning ahead you can help avoid credit card debt and have a happy holiday season.
4. Make on time payments: When the bills start rolling in in January, it can be easy to file away your holiday credit card statement and worry about it until springtime. However, this can prove to be a costly mistake. By missing a payment, it can affect your credit score. If you can’t afford to pay off your holiday spending spree in full, at least make the minimum payment on your credit card. Not paying the minimum balance can lower your credit score, lead to a higher interest rate and make it more difficult to obtain credit.
5. Keep your debt level low: If you’re planning a major purchase like a home or car and you need to borrow money, it’s important to keep your debt level low. Only borrow what you need (this includes holiday spending). In fact, I would advise against borrowing money for gift giving. Unless it’s a new pair of winter tires to get to work, it’s hard to justify spending 18 percent or higher interest on your credit card.
6. Avoid credit card convenience cheques: Right around the holidays credit card providers have the habit of sending convenience cheques in the mail. Before you go on a holiday shopping spree, it’s important to remember how costly this can prove. Most convenience cheques are treated like cash advances. Typically, you are charged interest from the date you used the cheque. It’s best to avoid them.
