Credit Cards and Christmas Shopping

If you're like many people, much of your current credit card bills are made up of Christmas presents from last year that you're still paying off. As a matter of fact, many folks will be paying off last year's presents well into the middle of this year – if not even farther. One way to keep this from happening again next season is to start saving now, so that you'll have the cash on hand to pay for those gifts outright, instead of having to resort to charging them. The savings will undoubtedly be substantial, as the interest fees on credit cards can add up quickly when a significant balance is carried over a number of months. And, if you're tardy making any of those monthly payments – watch out! Late fees can run as much as $35 or more for each occasion, not to mention giving the card companies a great reason to boost your interest rate even higher.

Speaking of rates, be sure to keep in the forefront of your mind just how much you're paying in interest. Many credit cards carry 15-, 19- or even 24-percent interest rates. That means you're actually paying substantially more on every dollar of purchased gifts you charged. If let go long enough, you could literally pay hundreds of dollars in extra interest alone for last years' Christmas presents. Wouldn't that money be better spent on this year's gifts?

So, work diligently to pay off those debts. That could mean tightening your belt for awhile to make larger-than-usual monthly payments on your credit cards. Remember, the faster you pay down those balances, the more money you'll be able to keep in your pocket and not give to the credit card company as added interest.

Once your cards are paid off, it's time to start saving for this year's holiday season. If you have the will power, you can just put an amount aside monthly in your savings account. This is also assuming, of course, that you're strong enough to leave it there untouched until the proper time. If you decide to take a few dollars here and a few dollars there, you'll wind up being sadly disappointed at how all those small, insignificant withdrawals add up to rob you of the quantity of money you were hoping to accumulate. That's why, for many people, a separate account or savings plan is a necessity.

Many banks offer Christmas Club accounts; nevertheless, look them over carefully before you sign up. Some offer lower interest rates than regular savings accounts. While carrying the 'Christmas' name, you really aren't getting any gifts by opening these accounts, because they earn you less return on your money than virtually any other plan would. It might therefore be more prudent to open a second savings account that you earmark specifically for your Christmas money.

While you may still be suffering the repercussions of last year's Christmas spending, those painful bills don't have to be an annual tradition. With a little extra planning and discipline this year, your Christmas can be funded in advance and leave you entering the next New Year debt-free.

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