The holiday season is in full swing. As you join the ranks of Christmas shoppers, you'll find plenty of ways to spend your hard-earned money. Using a credit card makes shopping easy; so easy, in fact, that many Americans will spend too much this month. Yet Christmas shopping does not have to lead to credit card debt. This year, you can take steps to avoid a gloomy credit card statement in January.
Create a Budget
Before you set out on a shopping spree, think about how much you plan to spend.
Make a list of the people you need to buy gifts for. Set a limit for each present. If you're on the hunt for decorations, baking supplies or wrapping paper, then add those items to the list and estimate your total costs.
Using a credit card to buy the goods on your list can make shopping easy. Just be sure you know what the credit limit is. Also, plan a way to pay back the credit card balance. Some experts advise spending only what you can pay off in three months. So if you can put $200 toward the credit card bill in January, February and March, then keep your spending under $600 (you may have to pay a bit more depending on your card's interest rate). Others suggest running a balance you can pay off within one month. Whatever you decide, make sure your plan is practical and works for you. With a budget set in place, you'll spend within your means and feel better about it, too.
Get the Most Out of Your Credit Card
As you use a credit card for holiday shopping, you'll want to make sure you get as many benefits as possible from it. Check for rewards like Arvest Rewards
or cash back offers; these can add up fast over the holiday season. If you plan to carry a balance for a few months, use a credit card that has a low interest rate. This will help you save on interest expense in the coming year.
Many stores offer discounts, such as 10 percent off, if you sign up for one of their cards. However, before adding another card to your wallet consider the long-term effects. Signing up for too many credit cards can affect your credit score. It may appear to lenders you are short on funds or you are overstretching your credit. Also, many store credit cards come with a high interest rate. If you do not pay off the balance right away, then you could get caught paying much more than you initially saved. Your best option might be to stick with the Visa or MasterCard that's already in your wallet.
With smart budgeting and wise use of your credit card, you can make the holiday cheer last into the New Year!