Managing your credit cards

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stay smart with credit cards (Photo by rahego via Flickr).

Stay smart with credit cards (Photo by rahego via Flickr).

As the holidays are approaching many people are preparing to gather gifts for loved ones.  Unfortunately many gifts are bought with credit, which leads to a lovely credit card balance in January.  There is no need to reach credit card limits this holiday season. Here are some clever ways to enjoy the spirit of gift giving without the heartache of credit payments later.

Know how much you’re willing to pay back with interest

Many people avoid thinking about the consequences credit cards can create after their initial shopping frenzy. Before receiving the bills for max-out limits, sit down and take the time to know how long it’s going to take to pay off charges and how much you’ll be able to put towards credit card payments each month. If you know how much the aftermath will cost, you may think twice about how much you’re willing to charge to credit cards. Try and keep charges as low as possible and remember: cash is always be better.

Don't let payments stack up (Photo by Andres Rueda via Flickr)

Don't let payments stack up (Photo by Andres Rueda via Flickr)

Try to stick with one card

It can be very tempting to use all the money available on credit cards in order to save cash during the holiday season. If it’s really important to hold on to some cash during the holidays, then try to stick to one card.  Maxing out all credit cards will just create a headache later, so pick the card with the lowest APR to use.  It’s always better to try and use only cash or debit and make credit a last resort. By only using one card it will also help to keep track of what was bought and future payments. 

Use layaway

Many companies are bringing back layaway such as Kmart, Walmart, and Sears.  Layaway is a way to purchase a gift without paying for it all at once. Instead of taking it home and paying the debt later, usually with interest, layaway allows customers to pay for part of it upfront and the rest later. Once it’s paid off, you just go and pick it up. It will cost the same price, but it is paid for in separate payments. A great way to use this program is to pay for each part with cash. This avoids long term payments later and the best part is that there is no interest involved.

Don’t apply for more cards

The last move to make is to apply for more credit cards before the holidays.  Racking up more debt will just create a bigger hole to climb out of after the holidays.  Credit card companies are good at making 0% APR and other unbelievable credit cards deals tempting during this time of year.  While they may provide a benefit now, check to see what the APR will be after the introduction period; it’s normally in the area of a 20-25% APR.  During the holidays they know a lot of people can be short on money. Don’t be pulled in by terms that sound good now, but will hurt later in huge interest payments.

Buying gifts for the holidays are great, but it doesn’t mean you should spend the rest of the next year paying off the debt.


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