Yahoo Finance 5 Reasons to Not Use Credit Cards This Holiday Season
Although there are lots of great reasons to use credit cards for holiday shopping, there are some downsides, too. Convenience comes at a price, and if you lack strong budgeting and spending habits, January's credit card bill may hit your wallet hard. Before you instinctively reach for plastic, watch for these indicators that you may be better off saving up and buying with cash -- or not buying at all.
[See: Prepare Your Finances for the Holidays.]
1. You don't have a holiday budget. Many people get caught up in the season and quickly lose track of their spending. If you don't have a budget, with details on how much you can spend, and how you plan to pay it off, holiday spending can quickly spiral out of control, leaving you with significant debt. A budget will help you plan your purchases, so you'll always know what you can and can't afford. Keep your cards in your pocket -- or at home -- until you have sketched out at least a basic budget.
[See: 8 Big Budgeting Blunders -- and How to Fix Them.]
2. You can't pay your card balances in full. Using rewards credit cards for holiday shopping makes a lot of sense. On top of the usual credit card perks, such as convenience and buyer's protection, you can earn rewards with every gift. Whether in airline miles or cash-back rewards, sign-up bonuses can earn savvy holiday shoppers hundreds of dollars in rewards. All of that effort is wasted, however, if you don't pay your balances in full when they're due. Depending on the interest rate, a holiday shopping balance carried from month to month can end up costing hundreds more than you ever earn in rewards or bonuses.
3. You can't resist store card offers. Retailers often make special promotions or deals during the holiday season that allow you to save big or earn rewards if you sign up for one of their store cards. The problem is that store cards in general don't have great terms, even if they come with lengthy interest-free introductory periods. Store cards are notorious for their high interest rates and other fees that become expensive later. Don't sign up for a store credit card unless you're certain that you can pay off the balance before the introductory period ends and you start paying interest.
4. You've pledged to shrink your credit card balances in the New Year. We can get wrapped up in holiday joy and choose to spend now and worry about it later. If your plan for holiday spending also includes a promise to start being financially responsible next year, you should reconsider pulling out the plastic to cover Santa's haul. Although many of us intend to deal with our finances in the New Year and plan to stop running up the cards, the truth is that debt leaves us starting out the year in a deep hole. Plan instead to keep balances manageable during the season. If you skip using your credit cards for holiday spending altogether, you'll enter January with much firmer finances.
[See: 8 Financial Steps to Take After Paying Off a Debt.]
5. You're already an impulsive buyer. If you know that you can't turn down a great deal, the holidays can make it that much harder to resist the temptation to shop and spend. After all, it's the holidays. And you're not buying for you -- you're buying gifts for other people. When combined with the stress of the season and the pressure from stores and retailers to spend, it can be a challenge to resist, and credit cards make easier to give in. A firm budget and a strict allocation of cash may be all the self-control you need to make it through the season with your finances intact.
More From US News & World Report
