Are You Suffering from a Holiday Spending Hangover?

Are You Suffering From a Holiday Spending Hangover?

Last Updated: July 9, 2010

Even with the economy in the doldrums, some people still overspend at Christmas on gifts for friends and family. If you didn't take our advice on how to save $500 for Christmas, chances are you maxed out your credit cards and you are still paying the price - in the form of interest and possibly over-limit charges. Before the next holiday season is upon you, now it the time to take action and get your credit card balances in order.

Are You Over Your Credit Card Limit?

If so, you will be charged a penalty fee, ranging from $25-30. If you only make your minimum payment, you will still be over the limit next month, and guess what, incur another fee. These can add up rapidly, as many people will attest. To avoid these fees, immediately send in a payment equal to the difference between your credit card limit and your credit card balance *plus* your over-the-limit fee. This will ensure that you do not get charged next month for being over the limit. Example:

Your credit card limit is $2,500, but your current charges total $2,577. Your over-the-limit fee is $25, and the minimum payment is $64. What payment do you need to make?

The difference between your limit and your current charges is $77. Is this more than your minimum? Yep.

$ 77		how much you are over the limit
25		the over-the-limit fee

$102		Total

You should make the $102 payment immediately, to avoid the late charge, which would make your total charges $2,525. With the late fee, you will again be over the limit on your account and you will be charged yet another over-the-limit fee.

What if You Can't Make Your Payments?

If you have to choose between your monthly obligations: make sure you at least make your mortgage and auto payments. These payments are the most important ones to make.
Ask your company for a one-time small advance against your paycheck if possible.
Ask a family member for a loan.
Call your auto and/or mortgage creditors and ask them if they will allow you to skip a payment and put the payment on the back end of your loan. This will not hurt your credit but it will extend your loan period by one extra payment. You are typically allowed to do this one time in the life of your loan.

Start a Christmas Budget

Pick a dollar amount that you would have been easily able to afford this year. Don't count on potential raises or bonuses you think are coming this year.
Start saving a few dollars a month for Christmas. Remember those old Christmas savings accounts? Many banks still offer this type of account.
Purchase gifts throughout the year for next Christmas so you won't get hit with all of the shopping expenditures next December.