We’re supposed to focus on giving and spending time with our friends and family, but for many of us it’s turned into a shopping nightmare, accompanied with the obligation of buying presents for every single person in our family.
In December 2011, shoppers charged billions of dollars on credit cards and according to a recent survey, the holiday spending for 2012 is expected to be 32% more than last year.
That’s a ton of spending! And it means a lot more chances for each of us to fall into a cycle aimed at spending more of our hard-earned dollars. Come New Year’s wouldn’t you rather have extra money instead of extra stuff lying around in your house?
In the past, my family had this insane need to out do each other with bigger, better and more expensive gifts, which eventually translated into thousands of dollars – just for stuff we didn’t need!
It got to be so outrageous, we finally made a pact to stop doing Christmas on a large scale all together. Now, I don’t buy but one or two gifts a year – and quite frankly I couldn’t be more happy!
While I’d love to tell you that the best way to avoid accumulating debt this Christmas season is to avoid buying any gifts, and to challenge yourself to buy nothing until 2013, that’s a little too extreme for most of us.
None of us intentionally set out to spend more than we should, but the Christmas season is geared towards spending and giving, which means we can easily fall into the shopping traps. Thankfully, there are strategies you can use to safely avoid them.
1. Low or No Interest Offers
Be careful taking advantage of enticing offers like “no interest for X months,” especially on expensive items you don’t really need – like furniture and electronics. If you read the fine print, you might find you’re required to pay the interest that accrues during the grace period or face serious fees and penalties.
In general – and during the holidays especially – you can save a lot on interest by only using credit for things you can pay for right away, not carrying a balance on your card, and putting off bigger purchases until you can pay for them in cash.
Avoid it: Pay with Cash or Debit
Speaking of cash, a recent study shows that consumers spend more with a credit card compared to cash. In fact, people spend 12-18% more!
So leave the credit cards at home and choose to spend cash for your purchases instead. Or pay with a debit card and you won’t be shocked when you get the credit card bill at the end of the month (after only charging a few dollars here and there). Trust me, it all adds up!
2. Department Store Credit Cards
An extra 10% or 15% off your purchase if you sign up for a store credit card is tempting, especially during the holidays, but it could hurt your credit score if you apply for too many new cards in a short period of time. These cards also have really low credit limits, which can lead to easily maxing out your limits (which negatively affects your score).
Not to mention, it can get you caught in a dangerous cycle of charging balances on multiple cards and not being able to pay them off in time, resulting in extra interest charges and late fees. And to top it off, interest rates on department store credit cards can be extremely high, up to 30% at some stores.
Avoid it: Use Coupons or Gift Cards
Many stores offer coupons and bonuses if you sign up for their email list. Check out our list of the best cash back shopping sites. Or you can search sites like Coupon Chief for digital coupons or a site like RetailMeNot.com for discount codes and printable coupons.
Don’t forget to check your local Sunday paper or weekly circular for coupons and discounts too. Most of the time you get a better discount with a coupon, than the 10% they offer when signing up for a store credit card.
Online shopping on Cyber Monday was up 28.4 percent compared with the same time period a year ago.
Staying in budget is also easier if you pre-purchase a gift card for that store. It’s similar to using cash because you’ve got a preset amount to spend and that’s it.
You can even buy a discounted gift card to your favorite store from eBay or PlasticJungle.com – so you’re saving money while avoiding the risk of overspending!
3. Overspending and Impulse Buys
Don’t be fooled by the clever marketing and ease of whipping out your plastic to pay for purchases you can’t normally afford. Even for a financial geek like me it’s tough to avoid. While impulse spending may feel good in the moment it can lead to a financial hangover, which really sucks.
There is one way to sidestep it, with one simple tool — a shopping list. If you make a shopping list in advance like you do before buying groceries, you’ll have little problem making sure your Christmas spending stays reasonable.
Avoid it: Shop with Smart Spenders
Another way to avoid overspending is by shopping with smart spenders. Instead of letting big spenders use peer pressure to make you impulse buy, let smart spenders influence you into getting a good deal and sticking to your budget.
If you have friends that are frugal shoppers, ask them to come along when you make a shopping trip. You can bounce ideas off them, while knowing they share the same goal: saving money and avoiding debt.
What’s one way you avoid the Christmas season overspending cycle, or do you avoid it all together like I do?
Image by kimubert