How to Avoid a 'Holiday Hangover'

The December holidays mean many things to different people. Families celebrate. There are parties. People cook special meals. It is a time to think about ways to please the people we love the most. That is one of the best things we can do for one another. But too many people think that the only way to do that is to spend money. That kind of thinking can cause trouble. It can cause big trouble for people who use credit cards.

There is a special name in the credit card industry for what happens to a lot of people during the holiday shopping season. It is called a 'holiday hangover.' People put too much money on their credit cards buying presents for their families and friends. They tell themselves that they will pay it off in two or three months. But life gets in the way of their plans.

Fees add up, balance stays high
People end up paying as little as they can on their bill in order to stay current with their payments. That amount is called the 'minimum payment.' It only covers the interest and a small amount of the entire balance. Sometimes people fall behind on their payments. When that happens, they are charged money for missing the payment date. Those extra fees and charges keep a high balance from ever getting any lower. So does only making the minimum payment.

There are ways to avoid a holiday hangover. There are ways to use credit cards without ending up in trouble. One way is not to use a credit card at all. The best thing people who do use credit cards can do is to be responsible about the way they use them.

Make lists, stick to them
Everyone who wants to give gifts this holiday season should start out by doing the same thing. They should figure out how much money they have to spend on presents. Then they should play Santa Claus and make a list. That way they know whom they want to buy for and can figure out how much to spend on each person. Do not go over the amount you have decided to spend.

People who have more love than money at holiday time can still give good presents. Families can pool their money and buy one big present for someone instead of a few small ones. Some families pick names. Each person only buys for the person whose name they picked. People can give gifts of time or gifts they have made by hand. There can be hidden treasure in second-hand stores or at rummage sales.

Set up a holiday spending plan
The best way to avoid a holiday hangover is to have a holiday spending plan in place. One Milwaukee woman buys presents all year long. She finds most of them on sale. When November comes, most of her shopping is done. Other families save a little bit of money every week. A woman from Brown Deer saves $25 every week from January until November.

She uses that money to buy presents for her children and their families. She keeps the money in her savings account. But there are other choices for people who want to do what she does. Some banks and credit unions offer special accounts for this purpose. They are called Christmas Club accounts.

All year long, people deposit money. As with a savings account, the Christmas Club account earns interest. Then, in November, the account is closed and the account holder gets a check. That check can be used to pay off the credit card that you use to buy your holiday gifts. Or it can be spent directly on the gifts themselves. Either way, you will have pleased the people you love. And you will do it without getting a holiday hangover.

How Much Will It Cost?

If you have a $1,500 balance on your credit card,
If the interest rate on your card is 28%,
If you make a minimum payment of $10.00 per month,
It will take you 291 payments, or 24.25 years to pay off the $1,500.
You will pay an extra $4,402 in interest on top of the $1,500.

Source: www.calculatorweb.com