How you pay for your gifts depends on your personality. Some people like cash; others prefer plastic. It's often easier to set limits with cash because it's tangible. "You're actually physically parting with the money," says Purschke. However, credit cards are fine as long as you treat them as credit and not extra money. "Credit is not a bad thing; the challenge is when are you going to pay for it?" explains Antle. If you think plastic is fantastic, Purschke suggests using a cheque book register to track your spending. Also, if you put spending money in your account beforehand, all the better, because you won't be stressed about finding the funds to pay off the bills.
Alternatively, you can buy gift cards at stores where you like to shop and use those to purchase your gifts. If you buy a $25 gift card, you've got a built-in spending limit, explains Purschke. You could also use a debit card, but then you're drawing from your bank account, and it's easier to spend $29 instead of the $25 you had allocated using a gift card.
As for merchant cards with attractive introductory offers, the same thinking applies – use them only as a method of payment that you pay off right away (especially as their interest rates are generally higher than regular credit cards – as high as 28.8 per cent, according to the Financial Consumer Agency of Canada).
Frenzied pace
You rush to fit in a little shopping at the mall after picking up the kids, so you eat out. You're attending four parties, so you fill up on gas more frequently and purchase more hostess gifts. The result is that you're spending more. To save your money and your sanity, simplify. "Encourage people in your circle to have a group party instead of holding four separate ones," says Antle. Or only participate in the activities that mean the most to you.
The payoff
If you don't save money ahead of time for holiday expenses, the inevitable whopping bill will arrive in January. Yang's advice? Pay it off in full as quickly as possible. "Credit card companies can charge 18 to 19 per cent. If you carry a balance, your debt will double in four years’ time," says Yang.
To pay off your credit card quickly, sign up for a new credit card with an introductory low interest rate offer (as low as 2.9 or 3.9 per cent) that lasts anywhere from six months to a year, and switch the balance from your old card to the new one. Remove the possibility of running up two cards by cutting up your old card and avoid adding additional charges to the new card as well. Or open a line of credit, which typically has a lower interest rate of prime plus two per cent or prime plus three per cent, and use it to pay off the credit card as soon as possible.
Finally, cut back on your discretionary spending for a few months: take a brown bag lunch, reduce entertainment and use public transit. If you're having trouble, consider contacting a credit counselling service, such as Credit Counselling Canada or Credit and Debt Solutions.
Want to cut down on the gift giving in your home? Read about how to stop your family from giving too much.
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