It can be easy to fall deeper into debt during the holiday season. Those celebrating the holidays are four times more likely to expect to spend the most money on gifts for family and friends (80%) compared to dining out (21%), social events (20%), travel (17%) and holiday decorations (16%) this year.
According to a survey by investment bank D.A. Davidson, 40 percent of American consumers are starting the holiday season with more credit card debt than they did a year ago, and 48 percent of them will end the holiday with even more debt. The fact that average credit card interest rates are at an all-time high doesn’t help.
All of this means one thing for consumers: only spend what you can afford to pay off on your credit card, if possible. When it comes to holiday gift-giving, this may require some creativity. The following tips may be helpful for consumers looking to avoid adding to their holiday credit card debt:
- Make a list and check it twice: Before going out shopping, put together a list of all of the people who need gifts. Write down what gifts need to be purchased next to each person and check off that person once the item is purchased. Stick to the list at all times.
- Stick to a budget: Create a budget on how much can be spent on each person or on gift giving in general and stick to it as much as possible. If needed, look at what was spent last year, and try to use that as a starting point. Think about what can be done differently this year to lower costs, if needed.
- Set aside savings: Before spending any money on gifts, do not forget to set aside a small amount for personal finances, such as replenishing an emergency fund or maximizing retirement contributions.
- Consider homemade: Not all gifts need to be store bought. Many times, gifts that are made-with-love, such as items that are baked, knitted, sewn, or crafted at home can go a long way. After all, it is often the thought that counts the most.
- Manage expectations: If finances are tight this year, alert family and friends that holiday gifts may look a little different this year than in years past. This will help them manage expectations so that they can adjust to the idea that things may look a little different this year.
- Use cash only: Many people swear by this method of shopping. Only spend what you have in cash. It stops the urge to charge everything when making purchases and makes spending feel more tangible, making the consumer put more value on what they buy.
- Avoid retail cards: When out shopping, it can be tempting to say yes to retail offers with discounts and deferred interest when signing up for a retail establishment’s credit card. Unless the consumer can pay off the balance in full, he or she will end up paying up to 27.5 percent more in interest than a normal credit card. It is not worth it in the end.
- Use rewards: Credit cards come with rewards of all kinds, and consumers often fail to use them. In fact, about 70 percent of Americans fail to spend them. Use the rewards on a card to cover a gift card or a price of an item on someone’s wish list.
- Use old gift cards: Approximately 47 percent of American consumers have unused gift cards with an average total value of $187 per person, according to a YouGov survey. Why not use this money on paying for Christmas gifts? If the card is up to five years old, it should still be usable, and if it is older, it is worth checking on the balance to see if it is able to be used.
- Consider regifting unused gifts: This advice may seem taboo, but in desperate times, it may be necessary. If someone gave a gift to a person that is unused and is still in perfect condition, there is no harm in regifting it to someone who is able to enjoy the gift.
- Shop secondhand: Another option when it comes to purchasing gifts is to consider shopping secondhand. According to a Morning Consult poll conducted last month, 38 percent of consumers say they will either definitely or probably buy gifts secondhand.
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If you have questions on this topic or are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.
