Print | Send To Friends | Add To Favorites | Comment

4 Principles to Follow to Avoid Credit Card Debt During the Holiday Seasons

By: Geraldo

Article Word Count: 765 words  [Comments (0)]
Total Views: 4 Views

Business people usually cash in on the holiday seasons to maximize their sales and profits. It will be high season for them. They will stock up, price up and smile all the way to the bank. They know that people will be less restrained in their suspending than at any other time. It possible that you may be among the many who have suffered post-holiday season financial stress, and want to make sure it does not happen again. Your success in this will be determined by how well you control three critical factors: your increased rate of spending, the manner in which you finance that spending, and the heavy financial demands that follow in the subsequent month.



Financing Using Plastic



With holidays like Christmas or the New Year seeming to come round too quickly, people often find they have not saved up enough for their celebrations. Moreover, budgeting is an alien concept during this and spending can spiral out of control. To cover the inevitable shortfall in resources, the credit card is an obvious attraction. There are advantages to using the card to finance your expenditure:



i) It gives you free access to about a monthÂ’s credit.



ii) It gives you the temporary ability to spend beyond your current means.



iii) It allows you to track your expenditure.



iv) You do not have to carry lots of cash around with you.



Use of credit card, how ever, does carry with it significant dangers if it is not carefully controlled. Research indicates that spending could increase by up to 35% when using a credit card compared with using cash. Here are some key principles to help you guard against running into credit card debt trouble.



1. Spending Plan



If your spending is going to exceed your income for the festive month, consider cutting intended festive expenses, or other expenses, to stay within your income. I am assuming you have drawn up your spending plan for that period. ThatÂ’s where a credit card comes to the rescue. Though not readily apparent, the use of your credit card can create distortions in the management of your finances. Unless you are monitoring your spending in both cash and credit, there is a danger that you will be uncertain whether or not you are living within your means. It would therefore be unwise to begin using a credit card if you are not in control of your finances, that means using a spending plan.



2. Debt to Income Ratio



Do not forget that use of your credit card adds to your indebtness. In managing your financial affairs, one of the key indicators to watch is your debt-income ratio. This is monthly debt repayment as a percentage of your monthly after-tax income, and raises a red flag when you tinker with too much debt. A ratio of over 20% is becoming unhealthy. If you already have credit card debt that is overdue, do not add to it.



3. Bridging Finance



Use of a credit card is ideally a means of short- term financing of your operations. That means settling any debt incurred using your card within days. Paying the minimum balance will not do. If you are not confident that you can pay it off in full, you wound do yourself a huge favor by not using a credit card. Should you decide to go ahead and use a card, you need to be prepared for extra costs in interest and penalties associated with extended credit. This adds to your expenses, and you need to be ready to be ready to reduce other regular expense to accommodate this, otherwise you run the risk of creating ongoing hard-core debt



4. Net Worth



Credit card debt incurred during the festive season is usually for consumer spending- paying for your holiday, buying gifts, entertainment, traveling expenses, etc and creates what is known as consumer debt. This kind of debt adds to your liabilities, but contributes nothing to your assets. Your net worth is reduced to the extent of consumer debt incurred. Shrinking net worth is not good for your financial health. So do have yourself a happy holiday. But as you go about it, finance it in a way that gives you the comfort that you won't be debt-laden the following month.


Article Source: http://www.articledashboard.com





Gerald Njuguna is the owner of www.creditcardperfection.com, a site which teaches people on how to apply for a credit card. Visit the site, view more information on credit cards and apply online.





Print | Send To Friends | Add To Favorites | Comment

Related articles


Choose A Better Balance Transfer Card By: Joseph Kenny - If you are currently experiencing problems making repayment of your credit card debt, then the time has come to consider switching your credit card account to a 0% account.
 
How Your Credit Score Determines The Size Of Your Bank Account By: Kevin Erickson - Every time you apply for any type of loan or you are issued credit or you pay any bill, it becomes a part of the equation that determines your credit rating.
 
Loans For Bad Credit By: Matthew Bourne - Personal debt in the UK has soared to record levels over the past few years.
 
An Average Credit Score – It Is Important When Borrowing By: Peter Crump - The average credit score is the rating that the 3 major credit bureaus assign to your credit report.
 
Avoiding Bad Credit and Repair By: Keith Gloster - Staying in contact with your payments each month can help you avoid bad credit.
 
Credit Cards Bring Festive Cheer By: Peter Kenny - Christmas is almost upon us once again and the worry of meeting the demands that it has on our finances comes to the fore.
 
Prepaid Credit Cards By: Joseph Kenny - If you have a history of bad credit and are unable to obtain a mainstream credit card, then prepaid credit cards may be just the answer you are looking for.
 
Get Your Annual Free Credit Report – Why Pay For It? By: Peter Crump - You can get an annual free credit report from any of the three major credit bureaus.
 
Getting approved for a credit card By: Joseph Kenny - It is a fact of modern life that credit cards are an increasingly essential financial tool.
 
Do You Need To Improve? Credit Scores Count. By: Peter Crump - To improve your credit score, you have to take steps to improve the rating that the credit bureaus give you on your credit report.
 
Credit Card Minimum Payments Create Debt By: Peter Kenny - A credit card minimum payment means that you can spend more and pay as little back as the credit card issuer will allow you.
 
Rewards Cards: Convert Your Current Card By: Matthew C. Keegan - If you are a current credit card holder – MasterCard or Visa -- you may be overlooking an important way to make your card work even better for you: by joining a rewards program.
 
Credit Help For Renters And Others On The Horizon By: James H. Dimmitt - Sue is a homeowner and pays her mortgage and other bills on time like a good credit consumer.
 
The IMF Deconstructed By: Sam Vaknin - A Dialogue Between Tom Rodwell and Sam Vaknin, December 1998 By Sam Vaknin Author of "Malignant Self Love - Narcissism Revisited" The following is a standard IMF document, taken from its own website.
 
4 Steps to Creating Good Credit By: James H. Dimmitt - As a consumer youÂ’ve learned the importance of establishing a good credit rating with your lenders.
 

Search the Articles


Subscribe

Receive alert message from us when new articles submitted to our site for free.

Enter your name

Enter your email

Categories

Syndicates