Federal Reserve data shows the average credit card assessed interest rate for accounts at the end of August 2024 was 23.37%, the highest ever recorded this century.
High rates make credit cards more challenging to pay off, keeping balances higher for longer. And running up those balances could also lead to credit utilization ratios reaching uncomfortable heights, which could damage your credit score.
Before the season gets into full swing, give yourself a gift by preventing debt obstacles for future you.
1. Find a way to get around high-interest debt
The less you owe on revolving balances, the more money you have for other things.
The obvious way to avoid debt is to use cash, not credit cards. But if there’s credit in your future, check out a balance transfer card, the kind with a 0% introductory APR for a year or more. Or consider consolidating debt with a lower-interest that could help you pay off a balance faster.
These options may be short-term solutions, but beware: If you take advantage of a balance transfer, don’t rack up more debt on a paid-off card. And know that high interest will resume if you don’t pay off the transferred balance before the card’s interest waiver ends.
If you have a debt problem, deal with it. If you have $20,000 or more in debt, National Debt Relief might be able to negotiate lower rates and balances on your behalf..
2. Make a list, check it twice
It works for Santa: make a list, create a budget, then stick to it.
Decide how much you’re going to spend for the holidays, divide that amount among the people and events you’ll be paying for, then allocate the money accordingly. And remember, the earlier you start, the easier it will be to keep to your budget.
Holiday budgets explode when we wait till the last minute to look for gifts, then have fewer choices at higher prices.
3. Chair the holiday committee
Ask your friends and family to join you in finding cost-saving alternatives for gifts and holiday gatherings. They’ll likely welcome more affordable options.
For holidays, these alternatives may include white elephant gift exchanges, potlucks, only giving gifts to children, or possibly pulling from a $5 spending jar for small gifts.
And if not everyone is on board, consider flexible gifts, such as donations in a loved one’s honor.
4. Prioritize your list and create a shopping plan
After you’ve created an overall budget and shopping list, prioritize it.
Shop for your higher priority and most expensive gifts first. That allows more time to use whatever tools you have to find those gifts for less.
For example, us price comparison apps to find the best deals. Look for sales, especially around black Friday.
Shop smart, early and thoroughly. The money you save on your most expensive and higher-priority gifts can be used to cover the cost of your lower-priority items.
5. Use points, not cash
Those reward credit cards can be your best friends this time of year. If you’ve saved up points during the year, now’s the time to cash them in for your gift purchases.
6. Substitute your imagination for your money
If you think of the best gifts you’ve ever received, they probably involved more thought than cash. Gifts of time, experiences, things you make yourself that recount shared memories, pictures, home-made cards…these are the type of gifts that mean the most and cost the least.
But personal gifts like these require thought and time, so now’s the time to get started!
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