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As tempting as it might be to shower your loved ones with expensive gifts this holiday season, you should resist doing it – at least with credit cards, experts say.
Surveys point to surging credit card debt that could harm people for years, these experts warn, with the total swelling to a record $1.08 trillion this year, according to the New York Federal Reserve. Forty percent of Americans are already starting the holidays with more credit card debt than a year ago, a survey by investment bank D.A. Davidson showed last month. And 48% will end the holidays in more debt, according to a different survey by Debt Hammer, a site devoted to helping people manage debt.
To make matters worse, average credit card interest rates are at an all-time high. Delinquency rates are also rising, especially among other people between the ages of 30 and 39, the New York Federal Reserve said. In 2022, credit card corporations charged consumers more than $105 billion in interest and more than $25 billion in fees, the Consumer Financial Protection Bureau said.
All of those trends are a solution.
“Only spend what you can afford to pay off by your credit card’s due date, if you can manage it,” said John Kiernan, editor at personal finance site WalletHub.
With that in mind, here’s a list of 12 expert-led steps to avoid debt-related hangovers:
On the first day of the holiday shopping season, make a list of other people to give gifts to.
On the second day of the holidays, make a budget. A holiday-specific budget can help you avoid overspending, so determine how much you’d like to spend on things like gifts, decorations, food, travel, and tips for service providers. . Use what you spent last year as a starting point. If your source of income is dwindling this year, think about what you can do differently to reduce costs. It’s conceivable that you could make automatic savings if, for example, you make a decision not to travel or host a small holiday dinner this year.
On the third day of the holiday season, use a budget calculator if you want more than just pen and paper to set limits on your holiday spending.
On the fourth day of the holiday season, give yourself a gift first. Sure, set aside cash for Christmas gifts, but do it for your own finances, such as replenishing an emergency fund or maxing out your retirement contributions.
On the fifth day of the holidays, think of gifts made with love. Cook, knit, sew, or make candles, for example. Or reduce the number of gifts by sending anything that the entire circle of family members can enjoy instead of individual gifts, such as a gift card to their favorite store or a gift basket of delicious treats.
On the sixth day of the holiday season, check expectations. If you want to cut back on expenses, let your friends and family know about the type of vacation you’re planning so they can adjust to the idea that things might be different.
On the seventh day of the holiday season, dedicate yourself to paying entirely in cash. It would possibly be easier to say “charge a fee,” however, for many people, handling physical money makes spending more tangible, leading them to get more out of the money. what they’re buying, said Willie Arroyo, a money adviser at Northwestern Mutual.
On the eighth day of the season, say no to retail cards. Retailers like Best Buy and Amazon will try to lure you with discounts and deferred interest if you apply for your credit card. Don’t be fooled. Unless you’re sure you can afford the balance, you may get your holiday shopping up to 27. 5 times more expensive than you anticipate, as the fees on those cards are some of the highest.
On the ninth day of the season, use your rewards. About 70% of Americans don’t spend them. Consider miles to pay for a plane ticket for your in-laws, or credit card issues to cover gift cards from colleagues or part of the value of an item on your child’s wish list.
On the tenth day of the season, dust off old gift cards. Forty-seven percent of Americans have unused cards with an average total value of $187 per person, a YouGov survey in June found. You can use cards to purchase gifts — or exchange or sell them.
Also, don’t worry if the gift card is several years old, you’ll probably be able to use it. Federal law gives you at least five years to use a card from the time it is activated, and states can give you even more time.
Also, if you’re shopping online and the gift card doesn’t go through because it’s old, call visitor service for help. If the rep can’t resolve the issue, don’t hesitate to ask their manager, who may have more leeway to lend you a hand.
On the eleventh day of the shopping season, pull out unused gifts. If someone gave you something that wasn’t for you and it’s still in pristine condition, don’t be afraid to regift it to someone who might like it.
On the 12th of the holiday season, stop by thrift shopping. You may not be alone. A Morning Consult survey last month showed that 38% of consumers will “definitely” or “probably” buy secondhand gifts. Among those feeling financially stressed, that figure rises to 46%, according to the report.
Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday through Friday.
This article was printed by USA TODAY: How to Set a Holiday Budget to Avoid Credit Card Debt for Christmas