NEW YORK (MainStreet) The holiday shopping season will kick off on Thanksgiving this year, and whether you're in a mad dash to join the rush on the holiday or do the traditional Black Friday shopping, one thing you'll not want to bring home is credit card debt. That, folks, is the cause of the painful credit card hangover.
Beverly Harzog, author of the book released on November 25 Confessions of a Credit Junkie: Everything You Need to Know to Avoid the Mistakes I Made (Career Press, 2013) was not always the credit expert that she is today.
"During my credit junkie days, I never had a holiday budget. I gave into impulsive shopping during the holidays, because there were so many great deals," Harzog says. "But instead of saving money on the great deals, I'd end up in credit card debt."
Harzog says the first rule of not getting yourself in debt is to make a budget based on what you can pay off when the bill comes in January and stick to it.
Harzog and other financial experts give these other tips so that you won't wake up one day in January with a big credit card headache:
- Track expenses: Harzog says when using a credit card it's very easy to pretend no money is involved. Harzog uses her credit cards strategically, not just because there are rewards or extra miles. Remember, if you're going to pay interest on the purchase, the rewards probably aren't worth it in the first place.
- Open new lines of credit for the right reason: If it's to save 10% on a purchase in a retail store, you should pass that card up unless you know you can pay it off as soon as the bill arrives. Harzog says that retail credit cards generally have higher interest rates. "Sometimes you can get $100 cash back or even a free airline ticket," she says. "If you need the type of credit card that's being offered, that's fine; however, if you're opening it up just because you don't have the cash to pay for what you're buying, it's a slippery slope that could lead to unwanted debt."
- Watch same as cash deals: They can be good, Harzog says, as long as you pay before the promotional period is up. Otherwise, you'll likely be paying all of the interest that was deferred and end up with a huge bill.
- Ask for a lower rate: If you have to buy something and know you can't pay it off next month, ask for a lower rate, says Mina Ennin Black, founder of Wealth Essentials Money Management.
- Don't use the credit card: That doesn't mean you can't shop. Many stores have reintroduced free or low fee layaways, says Xavier Epps, financial adviser and owner of XNE Financial Advising.
- Don't commit financial infidelity: Two in five Americans commit "financial infidelity" around the holidays, according to research by Joseph Grenny, coauthor of the Crucial Conversations (McGraw Hill, 2011). "People don't recognize the behavioral cues that lead to overspending and don't know how to have difficult conversations about money and debt," he says. Be honest with each other, and if you can't afford gifts for each other now, put off your gift giving until another time of the year.
- Leave your credit cards at home: If you think you might overspend, just don't take your credit cards with you, advises Dave Jones, president of the Association of Independent Consumer Credit Counseling Agencies.
- Lower the limit: "If you are a serial offender and you know that you will likely have big problems keeping yourself in check when it comes to holiday spending, consider lowering your credit limit," says Tabitha Jean Naylor of NinjaCredit.com. "Beware: lowering your limit can subconsciously give you 'permission' to spend up to that limit. So, if you don't lower it far enough this tactic can backfire."
- Give something from the heart: No money and you don't want to go into debt? Give a gift from the heart, which may be more appreciated than that tie. "Write letters of appreciation and gratitude describing your relationship and why it is important," says Melody Juge, founder and managing director of Life Income Management. "Instead, have an exotic pot luck dinner or Christmas breakfast."
--Written by Kerri Fivecoat-Campbell for MainStreet