We’ve made a vow at our home this year. We’re cutting back on presents. We don’t have any children, so this kind of vow is a lot easier for us. I imagine that kind of vow would be especially tough for a family that’s teeming with children, though. Still, even when I was growing up, I can remember having some pretty lean holiday seasons. My mom would say that we’re not going to buy a lot of presents for each other. Instead, she sat us down and taught us that we could make gifts for one another — and it would mean a whole lot more. Plus, it would cost us a whole lot less. Still, if you aren’t like my family, you should keep some things in mind this holiday season when you’re buying gifts. Don’t load up on credit card debt. We love each other, but it’s not worth going into hock to show someone you love them. My wife would rather get a kiss on the cheek from me than a $79 snow globe from Restoration Hardware. To be sure, I’m not saying to disavow your credit card during the holiday season. But I am suggesting that you have cash in the bank to back every credit card purchase you make. It’s easy to pile on the debt during the holidays, but the debt remains long after the holiday season ends. Two years ago, Consumer Reports magazine conducted a poll showing that some 23% of shoppers would not be paying off their holiday-shopping debt until March of the following year. (See Consumer Reports blog here.) I don’t imagine much has changed during the past two years. People will likely be paying off their shopping-related charges well into 2009. Paying in full eliminates that. Your good credit-card habits should not go out the window during the holidays. It’s not worth it. But if you are going to accrue some holiday debt, be sure to do it with your lowest-interest credit cards. That typically means using something other than your retail store cards. Those cards, if you haven’t noticed, are terrible for maintaining balances. It’s common for a store credit card to have interest rates of more than 20%. Retail stores will be out there trying to lure you into using their store cards (by giving you discounts at the register), but you should refrain. The interest-rate payments after the holiday season can easily outstrip the discount you got at the cash register. Therefore, try to use your low-interest bankcards instead.Loading up on debt this holiday season could also subject you to your card companies’ itchy trigger fingers. If you have been reading my blog this year, you’ve no doubt seen my stories about card companies trying to reduce their exposure to customers (American Express has been the most aggressive in this endeavor). Adding hefty balances to your credit cards during the holiday season is probably not the smartest thing to do. I have no way of knowing this, but I won’t be surprised to see credit card companies chasing balances after the holiday season. Not familiar with “chasing the balance?” This happens when you pay off part of your balance and your credit card company reduces your credit limit to just above your new balance. So-called balance chasing makes the customer look as though he or she is maxed out on the credit card as well, which hurts the customer’s FICO score. It’s bad news for the customer.Readers, sorry for sounding so preachy this morning. Just want to make sure that my readers are on the strongest financial footing possible. Pay in full now. And pay in full during the holidays. Everything should fall nicely into place.
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