Credit Tips for the Holidays
With the economy continuing its slow climb back from the brink, the 2012 holiday season is already shaping up to be an important one for retailers. And they know it. You've probably noticed that holiday commercials have already begun flooding the airwaves, and you may have even got a Christmas list already for your little one. (Little kids are SO frivolous, huh?) Anyways, as the holidays sneak up on us in a hurry, there are definitely a few credit tips to keep in mind during the "Most Wonderful Time of the Year." Earlier this month, the Huffington Post (among others news distributors) reported that credit card debt in the US grew by 6% from a year ago, this despite the fact that late credit card payments were actually at an 11-year low. So, while most of us are making our payments on time, odds are we're getting hit with some serious interest fees, too. And since the time of year in which we borrow the most is just about upon us, Creditnet wanted to make you aware of a few credit tips before the real spending begins.
Set a budget... And STICK to it
OK, you probably didn't need us to tell you to set a holiday shopping budget, but perhaps you did need a reminder to stick to it. If you don't have a budget in mind before shopping, odds are you could walk out of the store with a whole lot more than you bargained for. (In regards to both presents AND credit card debt.) This can be especially challenging with online shopping, the new preferred way to shop during the holidays. (Well, we prefer it, anyways.) The trick is to keep track of each purchase on its own. You can get a little geeky and set up an Excel spreadsheet or a Google doc if you think it helps your cause for organizing. This way, you can document each Holiday-related purchase, rather than lumping it together with an everyday expense. (Obviously, these aren't the same.) Plus, it'll help you keep track of what you got the kids, family members, cousin Eddy who lives in Alaska...everyone!
Speaking of budgets...
"How much should I spend on holiday shopping?" becomes a common Google phrase right around Thanksgiving. There's no set answer, of course, as every situation is different. However, according to the American Research Group Inc., the average shopper spent $646 on holiday gifts last year. (Down 2% from 2010 but up 56% from 2009 when the economic crisis was still at its peak.) We pass this information along not to say "This is about what you should spend," but rather to help you better anticipate the range of which you might be spending come December. (Or, more likely, Nov. 23rd aka "Black Friday".) The real answer, however, lies in your credit card interest rate. Here's what we suggest:
Only spend what you can pay back quickly
Don't let interest fees kill your Christmas spirit. We would recommend charging only what you believe you can pay back quickly, and by "quickly" we mean within two or three months, tops. After that, interest fees can start to amass significantly. Once you come up with your budget, devise a plan to pay back your credit card bill within your own self-devised period (again, 60-90 days is preferable) so that you're not blindsided with interest fees. This way, you won't be paying back 2012's Christmas gifts through Thanksgiving, 2013.
Have your kids make a list
And you think we're kidding... Think about it; you don't generally go grocery shopping without a list, right? So why treat Christmas shopping any differently? And while you may be worried about what kind of requests your kids come up with, odds are they're not going to come back to you with a 12-page list that includes words like "Porsche". The most expensive request is likely to be a video game console (around $200) or something in that range, and if you've ever seen this video, you know that everything other present is gravy. Plus, there's the whole "making your kids happy" part... C'mon, it's the season of giving! So there you have it. Budget wisely, get a list, and make your own payment plan. It's that simple! Now, if only figuring out what to do with your in-laws this holiday season was as easy...