MoneyDon't Waste Your Money


How to avoid holiday debt, as credit card rates hit 20 percent

Holiday shopping could take months to pay off this year
Credit Cards
Posted at 4:00 AM, Nov 25, 2022

It's always rewarding to buy someone else the perfect gift for the holidays, but not if it means tacking on more debt, especially this year.

That's because credit card rates are now at a 30-year high, which can make those holiday purchases very expensive.

Cheerful but cautious

Jeannie and Kayla Metcalfe were grabbing some of Target’s Black Friday deals, but watching their spending.

"I do not want a big bill, and I do not want to go into debt," Jeannie Metcalfe said.

With no stimulus checks and higher prices everywhere this year, they don't want to run up any debt.

"I am definitely going to try to watch the spending this year, especially with the economy," Kayla said. "Everything between groceries and gas is so expensive."

Think about how you will pay for every purchase

The holidays should be about cheer, not about debt. So while you are out shopping you shouldn't just be thinking about what you are buying, but how you'll be paying for it.

With average credit card rates now above 21 percent according to WalletHub, Nathan Grant of MoneyTips says the first rule of thumb is not relying on credit cards if you don't have the cash to pay off the balance.

"Don't look at your credit card as extra money," he warned. "Look at it as just a different way to pay for things that you can afford already."

Grant says retailers' credit cards are great for rewards and discounts, but only sign up for cards that fit your budget.

"Even though the interest rates on retailer store cards are usually even higher," he said, "if you're paying it off every month, that interest rate isn't even gonna be a factor."

He says when setting your holiday budget, don't forget about adding in food and travel costs.

Also, compare your budget to last year’s, when prices were lower and your checking account may have been flush with stimulus payments.

Other ways to avoid overspending on gifts, according to MoneyTips:

  • Split the cost with someone else, for instance a brother or sister.
  • Give a DIY present, such as something you made yourself, or a service that you can perform, such as painting or yard cleanup.
  • Use your unused gift cards to purchase gifts for other people (but be careful re-gifting gift cards, as you may be giving it back to the person who first gifted it to you).

Nathan Grant's last tip for credit cards is to look for other cost-saving perks, like price protection if prices drop later.

With price protection, he said, "the credit cards are less of a worry and more of a tool that you can use this season."

Jeannie and Kayla Metcalfe hope to avoid credit card debt entirely.

"No debt in January, hopefully," Kayla said.

That way you don't waste your money.


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