The holiday season and New Year’s Eve are known for excesses, and for the subsequent regrets. We cannot help you with the traditional form of holiday hangover, but we can help you avoid the “credit hangover” caused from excessive holiday spending. With some forethought and willpower, you can make it through the holidays unscathed (at least with respect to your credit).
Budget Holiday Expenses – If you can lay out a budget and limits for all of your gifts and other holiday expenses, you are more likely to keep your spending in check and your credit to a minimum.
It’s better to not charge on a credit card more than you can afford to pay off at the end of the month, but at the very least, set a cap on your credit overage, along with a plan on how many months it will take you to pay the debt off with interest. Totaling up the interest charges may give you incentive to cut back on spending.
Track Expenses – You may be overspending because you do not realize how much you have already spent. Track your expenses on a daily basis, if not a real-time basis. There are apps now that can help you monitor your expenses in real time, and alert you to imminent overages.
Do Not Open New Accounts – Special holiday offers may tempt you to apply for other credit cards to get a particularly good deal. Do not fall for it. If you cannot control spending with the cards that you have, what do you think will happen with more cards?
Avoid Impulse Buying – Impulse purchases are budget busters, and they are particularly hard to avoid if they are limited time offers. Vendors count on your inability to resist. If you are tracking expenses, you should have a good idea of how much discretionary money you have available and whether or not an impulse buy can fit within your budget.
Leave Cards at Home – If you cannot control your credit card spending, try taking a shopping trip without your credit cards or any other form of payment. This forces you to think about the purchase and whether it is really worth the expense. If you are concerned about missing bargains that are in your budget, stick to cash payments only (remember those funny green paper rectangles?) to avoid overspending.
Make Your Cards Inaccessible – Do you need another level of separation between you and your credit cards? We do not recommend the old “freeze them in a block of ice” trick, but you can leave them in the hands of a spouse or trusted friend if you honestly cannot control your spending.
Lower Credit Limit – The ultimate block short of cancellation is to request a lower credit limit. We do not recommend you do this, because your credit utilization (the credit you use over the credit you have available) will go up and lower your credit rating – and if you are having trouble with spending, that is probably the last thing you need.
However, if a lower credit limit is the only thing that works, it is better to have that than to rack up scary debt levels.
We hope that these tips can help you avoid having a wicked credit hangover to start the New Year. Just as with a traditional hangover, prevention and planning are important – but ultimately, moderation is the key. Also just like a traditional hangover, the “hair of the dog” approach does not work. It only prolongs the inevitable pain and makes it worse when you do “sober up."
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