The holiday season can be full of joy. Seeing family and friends and exchanging gifts, it can be the most wonderful of seasons.
However, with the holiday season can come tough financial implications. Over two thirds of Americans turn to their credit card to make purchases for the up and coming festive period.
It is not just Christmas that can take its toll on your finances. Thanksgiving and Black Friday can all play their part in adding to any mounting, existing debt that you may have.
Today, we all live in a very commercial world. Children expect presents under the tree and other family members may expect a little something too. As people, we can sometimes feel the weight of expectation and the need and desire to please others.
This expectation can lead to serious credit card misuse. Overspending is the main culprit and people may still be repaying the balance on their credit cards from 12 months ago.
Christmas should be about sharing and spending time with loved ones, rather than lavishing gifts upon each other.
However, there are ways you can control your credit card spending during the holidays.
Make Regular Payments to Your Credit Card Provider
Seems obvious, but you would be surprised how many people miss payments, especially in the months shortly after and the months leading up to the holidays. It seems that some people could miss up to four months worth of credit card payments for Christmas, Thanksgiving and Black Friday alone.
The best piece of advice to help manage your credit card is to ensure that you continue to make regular payments off your balance, regardless of the time of year.
If you want to go a step further, you may want to consider ensuring that you have a zero balance at the start of every month. This should help ease any financial burden, especially if you overspend this holiday season.
Set Up Automatic Monthly Payments
Continuing from the first piece of advice about making regular payments, setting up an automatic payment from your bank to your credit card provider can make things a lot easier.
Four out of 10 people have missed their monthly credit card repayment because they ‘forgot’. Setting up an automatic payment to your credit card provider will ensure that you never forget to pay.
Missing payments is very dangerous. Not only will you get charged, but the missed payment goes on your credit file. This may stop you obtaining extra credit in the future.
Zero Is the Magic Number
Always look at paying more off your credit card balance each month. As discussed previously, you should always be looking at completely paying off your balance each month. This allows you to stay on top of your debt.
If this cannot be achieved, then you must always look at paying in more than the ‘minimum’ amount, as specified by your credit card provider. Credit card providers to suggest a minimum payment that you must make each month, but if you continued to pay this minimum amount, you may never actually repay the debt on the account.
Never Use Your Credit Card as a Debit Card
One of the biggest problems with credit cards is that they act and can behave much like a normal credit card.
If you use your credit card, like a typical debit card, and withdraw cash through cash machines you will be charged for the privilege. Some credit card providers will allow you to withdraw cash for free, however the bulk of credit card providers will charge you.
Charges may range from one-off fees, to adding a number of fees on at the end of each month. If you regularly withdraw cash from your credit card you may be getting yourself into more debt than you can cope with. If this happens, you may have to look at consolidating credit card debt through other financial means.
How to Best Use Your Credit Limit
With every credit card comes a credit limit. But, be careful. If you start using all of the credit you have available on your credit card, this can be seen as a ‘reliance’ on credit.
You should be aiming to spend around 25 to 30 percent of your credit, with a view to repay the balance as quickly as possible.
If you start spending above this percentage threshold it can seriously negative consequences to your credit score. This is because you will be seen to be reliant on credit, as opposed to your own finances.
It Is All About Quality Rather Than Quantity
If you are using a small amount of credit, often, this can actually be good for your credit score, providing you repay it on a regular basis. It shows other credit providers that you are good at managing your credit, therefore will be happy to lend to you.
The flip side of the coin is if you have lots of credit spread over a number of different credit providers. This doesn’t necessarily have to be credit cards, this could be any type of credit that you have access to. This can have a very negative effect on your credit score, as it shows that you cannot manage the credit you have, regardless of whether you pay off the credit on a regular basis.
Making Your Credit Card Debt Cheaper
One way to make your debt cheaper, and therefore easier to manage, is to transfer your existing credit card balance over to another credit card provider.
Many credit card providers offer a zero balance transfer to their own credit card. So, if you have existing credit or balance outstanding on one card, moving it over to a zero percent credit card means that you repay less and can repay the balance quicker.
All these steps will help ensure that you can manage your finances over the holiday period. It is much about being sensible with your existing credit card, than trying to look at ways to repay the balance later down the line. Remember that ‘prevention is better than cure’.
