Avoid holiday credit card debt

The holidays, however joyful and anticipated, can put a financial strain on an already over-taxed budget. Gifts, decorations, groceries and other must-haves have a tendency to rack up large sales slips.

Perhaps you're one of the many who feel like this month-long indulgence can be financed with a credit card, which can defer the payments of large-ticket items. What you may not realize is that the repercussions of using plastic irresponsibly can last for months or even years.

A few years ago, the National Retail Federation found that consumers spend an average of $1,000 per household during the holidays on gifts and other seasonal items. When placed on a credit card that earns 20 percent interest on your deferred purchases, it takes an average of four months to pay off that amount (and that's if nothing else is being charged in the interim).

PLANNING CAN CUT DEBT

Before you head out to the store or log onto your favorite online merchant, take some steps to safeguard your finances.

• Set a holiday budget. Look at your savings and other money you have on hand. Devise a realistic budget of just what you can afford this season. Don't factor in holiday bonuses or cash gifts from other family members to help you expense your own purchases. Aunt Joy may give a little less this year and your company may have a party instead. That can leave you spending more than you have. Once you come up with a number -- stick to it.

• Make a list of purchases. If you go to the store with a list in hand you may be less likely to buy on impulse. Set a price limit on all gifts so you don't overspend. It's the thought that counts, not how much you've spent.

• Consolidate purchases. Devise ways the family can save money. You can hold a "Secret Santa" where each relative is responsible for one other family member's gift. This way everyone can purchase and receive two nice gifts, instead of several inexpensive ones (whose cost can add up).

• Use credit wisely. See your credit card as a link to cash in the bank, not money to borrow. This will make it easier to reign in purchases. If you can only afford $300 in gifts, don't charge up $500 with lofty plans to pay off the rest over time. When you head home, deduct your purchases from your checking account, so that you already know how much will go toward your next credit card statement.

• Leave the card at home. Credit cards can be positive tools. They help you avoid carrying large sums of cash or your check book to busy stores where pickpockets prey. However, if you can't gain control of credit card spending, opt to pay in cash.

• Watch online purchases. When shopping online, many sites let you deduct purchases directly from your checking account. If you have to use a credit card, you may also want to sign up for a secured card. Secured cards require a cash deposit to set a spending limit based upon what you can afford (many teens or college kids use this as their first credit card). As you make purchases, it depletes the balance. If you "max out" the card, it won't go beyond your spending limit and what you can afford. (Your spending limit may increase as you establish good credit.)

Remember, the holidays and beyond should be times enjoyed with loved ones. Be sensible about credit card purchases this season. Don't put a damper on the festivities by drowning in debt.