We all spend money over the holidays. In many cases, we spend too much, which isn't good. This week when talking to a group of our contributing credit card experts, Jason Steele addresses this question when he asks:
"What recommendations do you have to avoid credit card debt over the holidays?"
Lee Huffman - Travel enthusiast and expert who blogs at Bald Thoughts
Spending throughout the holidays can easily lead to a debt hangover once the credit card bills arrive in January. This is even truer when you're married and both of you are spending for the kids and the in-laws. What my wife and I have done is set aside an online savings account dedicated to Christmas shopping. We contribute to it automatically every month so that we have our gift money already set aside before the deals of Black Friday beckon our wallets.
Before we go shopping for presents, we look at our budget together and figure out who is getting presents and an approximate budget for each person. We do our best to stay within that budget, but if we go over, the out of pocket expense won't be as bad because of the money we've already saved for gifts. Once the flurry of gift buying is over, we evaluate how much we spent and decide whether or not next year's budget should change. If so, we adjust the monthly contribution amounts accordingly.
Robert Harrow - Product Manager in charge of the credit cards vertical at ValuePenguin.com
Research shows that people are willing to spend more—as much as 83% in some cases—when paying with a credit card instead of cash. Whether you like it or not, cards (on average) influence how we think about spending decisions.
I could give you general techniques for not overspending. There is also no shortage of methods for this online. However, the reality is that if you’re reading advice on this topic chances are this is something you struggle with already. If that’s the case, the safest option for your wallet is the most extreme one — avoiding credit cards altogether.
Use a debit card or cash instead. This is the only guaranteed way to avoid the holiday debt hangover. You’ll miss out on the 1-3% rewards rate you could get on those purchases (maybe more if you were going to use your holiday spending to hit a bonus). However, the upside is a guarantee that you won’t fall into a debt trap and end up paying 15% or more in interest rates.
Are you a big online shopper? You should go through and delete your saved credit card payment info on sites like Amazon. This will go a long way in preventing you from impulse buying things the next time you log on.
Dia Adams - Blogs at both TravelingMom.com and TheDealMommy.com to share hacks that help families travel more while still maintaining their savings and sanity.
I have to admit it's easier to limit myself now that the kids are 12 and 15. The biggest change in our shopping habits is the shift from stuff to experiences. Last year I took my daughter to Disneyland using miles and points. This year I'm considering concert tickets for my son and baseball tickets for my husband. Focusing on experience gifts makes me set a budget and helps prevent impulse spending. To keep the fun I do advent calendars with daily treats and creatively wrap what I do give. The kids still talk about the year all of their gifts were in cereal boxes.
The other place I noticed budget creep was with friends and extended family. Instead of an expensive holiday party, we throw a Christmas Leftovers party. This year will be our fifth Christmas afternoon when everyone comes over and we all share the sweets, cheeses, wines, and other stuff we want out of the house by New Year's Resolution time.
Eric Rosenberg - Finance, travel, and technology writer in Ventura, California
From the moment the Black Friday deals start, retailers make it very easy to spend a small fortune on holiday gifts, and goodies for yourself. A good budget is the best route to avoiding the common debt hangover millions of Americans deal with every January. Set a clear limit on what you want to spend on each person and in total, and stick with it no matter what. No true friend or caring relative wants you to be in debt over holiday purchases.
When it comes to credit cards, you should never spend more than you can afford to pay off in full every month. To avoid a huge bill you can't afford from holiday shopping, you can save for the holidays every month throughout the year. Saving a little over $40 per month gives you a $500 holiday budget, for example. With that cash in the bank, you can go out and shop with your favorite card to earn miles and points. And when the bill comes, you have the funds to pay it off without a penny of interest.
Jason Steele - One of the nation’s leading experts in the credit card industry, Jason’s work has been featured at mainstream outlets such as Yahoo! Finance, MSN Money, and Business Insider.
I think that there’s a psychological barrier that causes people to link their happiness to their spending over the holidays, much like people do when planning a wedding. The key to preventing overspending, and credit card debt is to agree as a family to consciously decouple their spending from their perceived happiness. You have to realize that the pleasure you get during the holidays is from family, friends and traditions, not from the dollar value of the gifts purchased or received.
Add to that some common sense advice such as setting a budget and avoiding credit card purchases that cannot be paid in full, and it becomes easier to imagine beginning the new year without additional credit card debt.
