A Happy Holiday Season Means Staying Out of Debt

Six percent of consumers, 14.1 million adults, are still carrying last year’s holiday debt according to a recent survey by Consumer Reports. Additionally, the same survey indicates more people are using credit cards for holiday shopping—53 percent compared with 47 for the previous year. That equals a whole lotta debt and accrued interest.

Here’s how to have a merrier and less stressful holiday season, both during and after the festivities.

Take Advantage of Reward Programs

• Cash rebates
  
• Points rewards
  
• Gasoline rewards
  
• Frequent flier miles
  
• Other travel rewards

Get the Most for Your Money

• Use your rewards and points for holiday shopping, and try to get rewards and points while doing your holiday shopping. With that said, make sure you keep track of when your rewards expire.
  
• If you sign up for a new card, try to get one that offers a generous sign-on or spending bonuses—if interests rates and other terms are reasonable, of course. If you already have a lot of debt or a ton of other cards, this might not be for you.
  
• See if your credit card offers cash back or gift card partner programs for shopping at certain retailers. These often include brick-and-mortar and online locations.
  
• If possible, use one card for your rewards to get the maximum benefit of more cash back or points.

Shop Responsibly

• Check your current interest rates on your card(s). If it is higher than you thought, this could mean significant interest accruals. If this is the case, call your credit card issuer to see if you can get it reduced.


• Make a budget and stick with it. If you can’t stay within budget, or just can’t control your spending, it’s better to use cash for your holiday purchases. The psychology behind using real tangible dollars is a strong and often effective deterrent from overspending. If you’re one of the six percent carrying last year’s debt—this means you.


• Scale back by buying fewer gifts, or lower ticket high quality gifts instead of several big ticket items. Or, if you’re used to buying for everyone you know or splurging on new game consoles for all 16 nieces and nephews, for example, you may want to rethink your strategy.


• Don’t create debt you can’t pay off before the holidays are over or within few months or so max.


• Keep your FICO score, often called your credit score, strong and healthy. This helps keep your interest rates from skyrocketing. Plus, by keeping these categories healthy, you’ll likely avoid penalties as well. According to myFICO.com, here are the top five key factors that determine your credit score.
  
  1. Payment history – What types of debt accounts do you have? Do you pay your bills on time?
     
  2. Amounts owed – How much debt do you owe? How many loans do you have? What percentage of your credit limit do you use? Experts often advise staying within 30 percent of your credit limit.
     
  3. Length of credit history – How long have you had this credit card and when did you last use it?
     
  4. New credit – What about any recent accounts or new debt?
     
  5. Types of credit used – How many accounts do you have? What types?

Be Creative

If all else fails, you can reduce your spending—and incurred debt—by being creative.

• Make some of your holiday gifts. This can be crafts such as pottery or gift baskets catered to your recipients tastes.
  
• Create personalized chore cards to donate your time to help friends or family members babysit, pet sit, or help with household chores and errands.
  
• Volunteer time for causes you care about—a soup kitchen, animal sanctuary, and more.
  
• Regift unopened gifts, as long as you can avoid offending anyone and it’s something the new recipient will love.

With these tips, you should be able to have a happier, less indebted holiday season. Remember, if you have trouble staying out of debt, take extra measures to make sure you don’t overspend, such as using cash or prepaid cards. Get creative if you have to. Remember it’s a season of sharing, not excess.

Follow @CreditDonkey or write to Kelly Teh at kelly@creditdonkey.com

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