The average family will spend considerably more this holiday season, despite record high debt burdens. Fact: Holiday spending will increase 3.8% this year to a record of $469.1 billion, nationally. While most of us have spent the past year desperately juggling our finances and trying to stay out of financial trouble, at the same time all of that concern and worry has gone out the window this holiday season. Why? Two words: credit cards.
The Root Of The Problem
It is no secret that we spend more using credit cards than we would with cash. It is easier than using cash and costs you nothing in the moment, but it also fosters an “out of sight, out of mind” mentality. Studies have shown that we spend 30% more money when we use credit cards instead of cash. It is important to note that this 30% refers to actual purchase balances and does not even include the additional amount spent in interest on those purchases.
While it is too late to begin a holiday savings account for this year’s spending, there is still time to control your spending. Make good faith efforts to pay for your purchases in cash or directly out of your bank accounts and not use any credit cards. If you do use a credit card, be sure to amend your spending over the next few months to have that purchase paid off before Spring. To prevent the need for credit negotiations down the line, be sure to keep a close eye on your balances after the holiday season and set a goal to pay down your credit cards in the year 2012. Nothing says “Happy New Year” like one that is free from debt and financial pressure.