The holiday season is fast approaching and people are beginning to prepare for gift shopping. Whether that be saving money and creating a budget, a lot are wondering if they could just place it on their credit cards. Well it heavily depends on your own financial situation if you can or can’t. It’ll boil down to if you have the money or don’t. Let’s dive into using your credit cards for holiday shopping and how it can effect your personal finances if you do and if you don’t have the money to pay the balance.
If you fall into credit card debt this holiday season reach out to ACCC for debt management program information.
You’re Able To Pay Off the Balance
On the positive side, credit cards can offer rewards, cashback, and points that can be beneficial. Using credit cards can provide a level of buyer protection and extended warranties on purchases, which can be especially useful for high-ticket items. So are there really benefits to using your Credit Cards For Holiday Shopping?
Using credit cards responsibly during the holiday season can help you build your credit score. A timely payment on your credit card demonstrates good credit behavior, which can positively impact your credit rating.
Finally, many credit cards offer travel benefits, such as trip cancellation insurance, lost luggage reimbursement, and travel accident insurance, which can be particularly useful if your holiday plans involve travel. So, when used wisely, credit cards could enhance your holiday shopping experience by providing rewards, protections, and added conveniences that cash or debit cards might not offer. Make sure you stick to your budget and shopping list. Avoiding the temptation to impulse buy other items while you’re out shopping could very well be the difference between good credit and bad credit plus a long cycle of debt and interest that is tough to pay down.
You Aren’t Able To Pay Off The Balance At The End Of The Month
Now there are significant risks involved if you are unable to pay off your credit card balance promptly. Carrying a balance can result in accruing interest, which can quickly add up and lead to substantial debt. High-interest rates can make it challenging to pay down the principal amount, causing debt that can be difficult to escape.
To mitigate these risks, here are a few strategies:
- Create a Holiday Budget: Determine how much you can afford to spend without relying on credit. Stick to this budget to avoid overspending.
- Consider Alternatives: Look into holiday savings accounts, or using debit cards to avoid accumulating debt.
- Shop Smart: Utilize sales, discounts, and coupons to save you money while shopping to decrease the possibility of needing a credit card. Look for the item(s) online. Perhaps a credible online store has it at a lower price.
- Avoid Impulse Purchases: Plan your shopping list in advance and avoid spur-of-the-moment buys that can blow your budget.
- Prioritize Payments: If you must use a credit card, prioritize paying off the balance as soon as possible to minimize interest charges.
- Seriously think about the item(s) and if they are important though. At the end of the day your friends and family want to see you. It’s not about what you can give them, but being together with them. Really think to yourself is that gift worth the possibility of me accruing debt with interest that I could fall back on and ruin my credit?
- Make sure you utilize rewards wisely. If your credit card offers rewards, use them to offset holiday expenses or save them for future purchases.
If You Run Into Trouble Help Is Available
If you find yourself having trouble paying off your credit card balance at the end of the month you may want to speak with a credit counselor. Non-profit credit counseling agencies like American Consumer Credit Counseling (ACCC) may be of service to you. So how could ACCC help you? They can provide you with a comprehensive financial assessment to understand your current situation thoroughly while offering budget counseling to help you create a realistic and sustainable plan to manage your income, expenses, and debt payments.
Lower Fees and DMPs
Additionally, they may help you negotiate with your creditors to potentially lower interest rates or waive certain fees, making your debt more manageable. ACCC can offer debt management plans (DMPs), which consolidate your payments into a single monthly payment directed towards your creditors. This can simplify the repayment process and potentially reduce the overall amount of interest you pay. They also provide educational resources and workshops to improve your financial literacy, empowering you to make informed decisions in the future.
Using Your Credit Cards To Holiday Shop Doesn’t Work For Every Wallet
Sometimes cash or debit will be the best option for some who has credit cards with high interest rates. The safest plan is to not spend what you don’t have. If you spend $600 on holiday gift shopping and pay for it with your credit card, be sure you have the money to pay it off at the end of the month. If you don’t have $600 and that’s what you spend using your credit cards, you now have $600 dollars in credit card debt. Minimum payments could trap you in an endless cycle where you’ll need to at least pay more than the minimum. You might also have to contact your creditors or enter a DMP (Debt Management Program), like ACCC, to them call your creditors for you.
Consider Your Financial Situation
Using credit cards for holiday shopping when you don’t actually have the money to pay the card off, could damage your credit and place you into a seemingly never ending cycle of debt. you’ll be required to pay a minimum amount each month, but be sure to pay more if you can. Minimum payments don’t do much damage to the balance and interest you owe. By carefully considering your financial situation and planning accordingly, you can enjoy the holiday season without the stress of unmanageable debt. Remember, the spirit of the holidays is about spending time with loved ones and creating memorable experiences, not just the gifts you give.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.
