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

It’s always gratifying to buy someone else the perfect holiday gift, but not if it means going deeper into debt, especially this year.

That’s because credit card rates are now at their highest in 30 years, which can make those holiday purchases very expensive.

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

“I don’t want a big bill and I don’t want to go into debt,” Jenna Metcalfe said.

With no stimulus checks, no more child tax credits, and higher prices everywhere this year, they don’t want to rack up any debt.

“I’m definitely going to try to watch spending this year, especially in the economy,” Kayla said. “Everything between groceries and gas is very expensive.”

Think about how you will pay for each purchase

The holidays should be joy, not debts. So while you’re out shopping, you shouldn’t just be thinking about what he’s buying, but how he’s going to pay for it.

With average credit card rates now exceeding 21 percent according to WalletHub, MoneyTips’ Nathan Grant says the first rule of thumb is not to trust 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 a different way to pay for things you can already afford.”

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

“Even though the interest rates on retail store cards are typically still higher,” he said, “if you pay them every month, that interest rate won’t even be a factor.”

He says that when setting your vacation budget, don’t forget to add in food and travel costs.

And he says to compare your budget to last year, when prices were lower and your checking account might have been full of stimulus payments.

To avoid spending too much on gifts, Grant said:

  • Split the cost with another person, such as a brother or sister.
  • Give a DIY gift, such as something you’ve made yourself, or a service you can perform, such as painting or gardening.
  • Use your unused gift cards to buy gifts for other people (but be careful when regifting gift cards, as you may return it to the person who gave it to you first).

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

With price protection, he said, “then credit cards are less of a concern and more of a tool you can use this season.”

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

“No debt in January, hopefully,” Kayla said.

So you don’t waste your money.

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