3 Dangerous Christmas Shopping Debt Traps and How to Avoid Them

The Christmas shopping season is one of the most expensive times of the year. It’s also my least favorite.

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 altogether. Now, I don’t buy but one or two gifts a year – and quite frankly I couldn’t be happier!

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 of 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!

Yikes! I am guilty of falling into these dangerous Christmas debt traps - time to get out! Pinning this to remind myself as Christmas gets nearer that I need to pay attention and stay out of debt this year. A debt free Christmas is the way to go.

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 30 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?

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About Carrie Smith

Carrie Smith is an ex small business accountant who now helps freelancers and entrepreneurs get out of debt and organize their lives, so they can fund their dream business. Find her on Twitter @carefulcents.


  1. Leslie Tayne Esq says

    A lot of people don’t have the extra money to splurge on gifts for their family but feel that they have to because of the pressure put on them by marketers.  So many people just purchase these gifts that they cannot afford and put them on credit.  These are great tips to help people avoid accruing debt over the holiday season, which will just make the new year more difficult!

    • Carrie Smith says

      That’s a very true point, Leslie. I myself struggle with the marketing and constant “buy, buy, buy” mentality that accompanies this time of year. Thankfully, I have some strategies to use like the tips I pointed out here. They do help!

  2. I am buying less and only using cash. I also find it a major advantage to shop online and take advantage of coupon codes. There are no crowds, confusion or pressure so you can accurately add up what you are spending to stay within a budget.

  3. Carrie,
    Great piece on how ugly holiday spending can get. I avoid  overspending by making a list of gifts I know I can get at a reasonable price. I compare prices and products to no end before I make a decision. Also, I never go shopping when I know they’ll be crowds. Crowds can peer pressure some consumers into buying, or so I think.
    -Christian L. @ Smart Military Money

    • Carrie Smith says

      @Christian L That’s a smart strategy, one that I like to use too! I compare and research prices all over so I know I’m getting the best deal. I also agree with your point about shopping with crowds – that’s the worst time and the peer pressure is definitely tangible. Smart thinking!