It’s official: We have entered the holiday season once again. For most people this is a joyful time filled with love and gifts. But for some of us these are stressful times. Parents will stop at nothing to put a smile on their kid’s face, friends want to show appreciation, and society has forced us into an expensive gifting culture.
Last year alone Americans racked up about $1,300 in holiday debt on average, according to MagnifyMoney, and about 78% of those who took on debt ended up paying some form of interest.
So, in an effort to prevent you from overspending and accumulating credit card debt, I reached out to Laura Garcia Villalpando, a financial wellbeing coach with Project HOPE, and a member of ALG’s Homeownership and Financial Wellness Committee, to ask about credit card and holiday debt.
What is credit?
Credit is a tool that can be used to borrow money or have access to goods that an individual cannot afford to buy with cash. In almost all instances borrowing means paying interest on what you borrow.
Why should people build their credit?
Many businesses, landlords, mortgage lenders, utility providers, and even employers use your credit to predict your future financial responsibility. Anytime you need to borrow money, finance an essential item, or set up services, your history of paying bills (your credit) is examined.
How should people view their credit in regards to the holiday season?
Definitely have a clear understanding of your financial limitations and goals while shopping for this and any holiday. Keep in mind that adding more debt will only set you back from reaching your goals. Budget before shopping and know that it is OK to send a card or a personal, homemade, less expensive options than buying at retail prices.
Never think that the credit limit is “extra money” you have. It is not and if you borrow you will eventually have to pay it with interest, often at extremely high rates.
Now that you know about credit and its importance, you can be wary of the slippery slope of high debt, and determine to stick to a budget. And remember a gift is about the gesture and meaning, which is not necessarily tied to the dollar amount.
Happy holidays and please stay away from holiday debt!