How To Spend Wisely With Credit Cards This Christmas

by Hank Coleman

More shoppers will use credit cards for holiday gifts this year.Americans have more pep in their step this Christmas. According to USAA’s fourth annual Holiday Spending Survey, consumers are more positive about their outlook this holiday season than last year. The financial giant’s findings were actually in line with recent reports from the National Retail Federation. The survey found that holiday sales are expected to grow above the current 10-year growth rate for holiday sales.

But, with this renewed optimism, there is a danger of overspending with credit cards. More people than ever before are planning on paying for some if not all of their Christmas gifts with their credit cards. And, like always, most are not planning on paying off those credit card balances right away. So, how can you protect yourself from spending too much on your credit cards this holiday? Here are a few tips to help you spend wisely even while using credit cards during this holiday season.

USAA Survey Finds An Increase In Holiday Gift Giving

USAA’s Annual Holiday Spending Survey found that consumers plan to purchase more holiday gifts this year as opposed to what they bought last year. According to the survey, shoppers sentiment with respect to holiday shopping has become more positive this past year from surveys that were conducted in 2011. For example, 40% of shoppers in 2010 reported that they had plans to scale back their holiday spending. Only 31% said they were scaling back their spending in 2011, and just 24% of Christmas shoppers said they were looking at reducing their spending in 2012.

Fewer Shoppers Are Making A Spending Plan

This year only 55% of all shoppers had a budget and a spending plan on how much and who they were giving gifts for this year. This was a worst percentage than the previous two years where 57% in 2011 and 61% in 2010 said they had a holiday gift giving budget. Despite the continued high unemployment and less than stellar financial markets, fewer holiday shoppers are planning to slow down on their holiday gift giving. For three years in a row, holiday shoppers actually plan on increasing the number and amount of gifts that they are giving their friends, family, and loved ones. To make matters worse, shoppers are not making a spending plan or a budget when they set out to buy their gifts. This is the one place where I’ve strove to be better in my own financial life. I have decided this year to write down every person that my wife and I are going to buy Christmas gifts for and to also list out the gift that we are buying in advance. Now that I have a budget and a plan, I can stick to what I plan on spending. This year is also one of the first years in a long time where I know exactly how much I am planning on spending.

Shoppers Plan On Using Their Credit Cards During The Holidays

Almost half of all shoppers this holiday season plan to use their credit cards this year, but less than 33% reported that they plan on paying off their holiday purchases they made on their credit cards in full immediately. This of course is a big danger to your wallet and financial well being. “Credit cards are convenient and can provide some cool benefits like miles or cash back, but they are also the easiest way to spend what we don’t have…that’s where the danger comes into play,” says JJ Montanaro, a Certified Financial Planner™ with USAA.

There is also a danger in overspending when you use credit cards. There is a reason that casinos do not use cash at their table games. You can really see what you are losing at the craps table. But, if you use casino chips instead, it seems like you are not using real money. There is a disassociation with it. The same is true when you use credit cards. There was a study that was completed years ago that found a startling revelation with credit card purchases at McDonald’s when the fast food chain started taking credit card payments. A Dunn and Bradstreet study found that consumers spend 12-18% on their purchases when they use credit cards as opposed to using cash. McDonald’s found that their average transaction amounts increased from $4.50 to $7.00 when their customers used credit cards to pay for their meals.

“It may seem like a good idea at the time, but ending up on the other side of the holidays with a big pile of debt because you let your credit limit – not your own spending plan – provide the guide rails for your shopping can be a painful realization,” says Montanaro. This shows why it is even still dangerous to use credit despite paying off you balance every month. There is no immediate feedback and pain when using your credit card. The pain is delayed until you receive the bill a month later. The separation helps you negatively reinforce the disassociation and subconsciously spend more.

Five Ways To Ease Your Credit Card Pain This Christmas

Comparison Shop With Your Smartphone

Using your smartphone or tablet while you shop to find the best deal will be a staple for Christmas shopping this year. According to recent surveys, 56% of shoppers plan to use their phones and other mobile devices to help them comparison shop for gifts. Smartphone apps are a great way to help you compare prices, download coupons, research products, and make the most informed buying decisions this Christmas. According to a recent Javelin Strategy survey, consumers will have spent over $20 billion by shopping on their smart phones and mobile devices in 2012.

Make A Shopping List For Christmas

One of the best ways to say on budget this Christmas is to have a shopping list for your gift giving just like you would if you were going to the grocery store. Making a list, checking it twice, and sticking to it like Santa will help you keep tabs on how much you are spending and limit the amount that you could overspend. “Commit to only buying what’s on your list, no matter what currency you use,” says Montanaro. Sticking to your list can help you avoid those impulse purchases that often sink a budget.

Shop With An Accountability Partner

Another great tip from Montanaro is to shop with an accountability partner. “It’s often easier to stray from our well-laid plans when on our own,” he says. It works great when you are working out and lifting weights. The same is true for spending. Tell someone you care about or someone you are shopping with how much you are planning on spending. Let them see your shopping list. Announcing how much you are spending to others and accepting comments or even criticism from them will help keep you accountable.

Be On The Lookout For Coupons

There are so many coupons available to help you find the best deals on your Christmas presents at this time of the year. If you have a list of everyone you are shopping for and what you are going to buy for them, then it is easy to know what coupons to be on the lookout for. For example, my oldest son wants several expensive Lego sets for Christmas. Because my wife and I are on the Lego newsletter, we get coupons through email and alerts when lego.com is offering free shipping on their site. This alone has the potential to save $20 or $30 off a purchase. As most parents know, Lego sets are not cheap. Another awesome way to save is to be on the lookout for coupons on Facebook and Twitter. I was able to snag a 20% off coupon for one item at Toys R Us from Facebook the other day. It was great! And, like I always recommend, do not buy anything online until you check for coupon codes on RetailMeNot.com. Saving money with free shipping codes alone can be a huge savings during the holidays.

Do Not Get Caught Up In The Frenzy

It is easy to get caught up in the moment when shopping for Christmas. For days now, the television news networks have been talking about how shoppers are already standing in line for Black Friday deals, and websites have been giving customers a sneak peak of the sale flyers. It is almost like getting wrapped up in the excitement of an auction or buying things off of late night television infomercials. There’s a feeling of missing out if you don’t get the best deals. Black Friday has the same feel, but like an alcoholic, acknowledging it is the first step. Don’t give into the frenzy.

Credit cards are an easy way to pay for your Christmas and other holiday gifts, but they should be used with a bit of caution and pragmatism. There are some great tips that can help you keep your holiday gift giving and spending in check this Christmas season. Credit cards do not have to be the only way to pay for your holiday gifts this year. There are many other ways and techniques that you can use to keep your finances in check.

What has worked for you? How many of your holiday gifts are you putting on plastic this year? Are you putting more on credit than last year? How are you keeping your spending in check this Christmas. I’d love to hear your thoughts in the comment section below.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and is currently pursuing his Certified Financial Planner credentials. Email him directly at Hank[at]MoneyQandA.com.


Hank Coleman has written 524 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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{ 4 comments… read them below or add one }

Alexis Marlons

I think the wise way to spend the credit cards during the holiday seasons is to buy early on the year. Don’t wait till the season is near before you buy gifts because though there are a lot of discounts, the interest may be higher (because they know that the people would be panic buying).
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Hank Coleman

It is a great idea to spread out your gift buying throughout the year. Or, you can save money throughout the year and pay cash during the holidays.
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John S @ Frugal Rules

Amazon came out with a handy little app that lets you do a comparison to what they’re selling an item for. We’ve used it a few times already.
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Hank Coleman

I’ve used that one too. You can even scan the item with the app and your smartphone to find its exact match on Amazon.
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