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No Credit Card Christmas

July 3rd, 2010 by nickelnm

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Christmas and Credit cards two words that are synonymous with each other.  Christmas doesn’t have to mean increased debt and credit card payments.  With a little pre-planning and creativity Christmas can be fun again.  Christmas is one day 5 minutes  once a year yet the payments from the marathon shopping and Black Friday sales last for months.  July is a great time to start planning.  There are 176 days until Christmas start preparing now.

My philosophy on Christmas saving is exactly like the my philosophy on building an Emergency Savings Account automate it as much as possible. I have a fascination with round numbers; I would start with $10, $15, $25, or up and set-up an automatic savings plan.  When Christmas comes you have a savings account stocked with money.  Money that can be spent on Christmas gifts or credit card payments (see the post about maximizing  credit card rewards located on my sister blog).  Do not worry if the account doesn’t have enough to cover the full cost of your Christmas, start small and build.  The first year we had our Christmas Savings account we had just paid off one of our loans, we simply rolled that payment over into the Savings account.  The money was never missed and at the end of the year there was $1500 in the account, but my limit for Christmas s $1000; at the end of shopping we were able to carry $500 into the next year.

As cliche as it sounds; time is your friend.  Every little bit that is able to be put away early saves more in credit card interest.  Let’s take the same $1000 I spent at Christmas time and assume it was put on a credit card.  According to Bankrate the current fixed average interest rate is 13.74%.  Paying only the minimum, $15.00/month (estimated), it will take 80 payments (6.66 years) to pay off the $1000 balance.  The interest charges are approximately$442. Christmas spending by your family has just increased by 50% without any extra gifts.  Instead of that particular Christmas costing $1000; it has now cost your $1442.00 and depending on your credit ratio – it could have cost you credit score points which results  in higher rates on everything in your life.

If there is consistently a small amount of money placed into a savings account you could make $5.00-$10.00 in free money and save interest fees on the credit card.  Stay tuned for more tips throughout July on saving money and making the most of Christmas through our Christmas in July Series.  Calculate your own interest fee here.

What tips and tricks do you find works best for you family to prepare of Christmas and stay out of debt?  We love reader comments and questions.

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Follow Nicole on Twitter for immediate notification of new posts.  She also writes more about finances an credit at her personal blog, Finance Diva.

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About the Author

Nicole Rosen, Finance Diva, is a self-taught financial guru. She has spent the past several years in the role of CFO of her family. Her credential include passing DFI's Loan Originator test, managing a tax office for two years, preparing taxes for other people for seven years, being registered with the IRS and State of New York as a tax preparer, and repairing her credit in order to purchase the first family home. Nicole has been self-employed since March of 2003 and her first taste of finances was when she was only 15 and ran a roadside watermelon stand in Oklahoma. Nicole has managed the books/recordkeeping for the family business back home for over 10 years.

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