Are January credit card bills for December expenses giving you a post-holiday financial hangover? You’re not alone. A recent survey done for the National Foundation for Consumer Credit (NFCC) found that nearly one-third of consumers overspent their holiday gift budgets, and 82 percent of these overspenders exceeded budgets by up to $500!
For many Americans, this tendency to overspend during the holidays can lead to year-round troubles, and create serious debt problems down the road. With this in mind, Citibank is offering 12 simple credit management strategies to help you better manage your credit and spend within your limits during 1997.
1) Start out the new year by taking your “credit pulse.” Total up your debt and make sure it’s still manageable. If your own pulse quickens, that’s not a good sign. As a rule of thumb, your total installment debt (e.g., credit cards, auto loans, student loans) shouldn’t exceed 20 percent of your annual take-home pay. If it does, you need to cut back, and credit card debt may be the easiest place to start.
2) Don’t be misled by your credit card spending limit. Credit card issuers give you a line of credit based on information available to them on your financial situation. However, you are the best judge of what you can comfortably manage. Just because you have a certain amount of credit available on your card, doesn’t mean you should use all of it.
3) Set your own limit. Determine the maximum amount of credit card debt that is ideal for you. Once you get your balances down to that level, don’t exceed it. Wait on making any purchases that would put you over your limit.
4) Lighten your wallet — try carrying only one or two credit cards to consolidate your spending. Using several cards simultaneously can make it difficult to keep track of your purchases and result in over-spending.
5) Keep track of all your charges. Use a money management tool like Citibank’s Credit Minder. It works like a checkbook register, allowing you to easily record all purchases, payments and interest charges as they occur. To obtain a free Credit Minder, call 1-800-669-2635.
6) Don’t charge what you can’t afford, even if you feel like you deserve it. That extra weekend at the office doesn’t necessarily mean you deserve a new wardrobe. Try rewarding yourself with things that don’t require the use of a credit card, like a visit to a museum.
7) Think about what you’re charging — it might be better to pay cash for that loaf of bread. It’s convenient to use your credit card as a substitute for cash when paying for small items — like groceries or a video rental. But these small purchases can add up quickly, and have an impact on your next statement’s “New Balance” column. Only use your card for these types of purchases if you’re sure you can pay for them at the end of the month.
8) Reserve your card for significant or planned purchases. You may have some major items you want to purchase this year with your credit card, like furniture, a computer, or vacation travel. Start putting aside some money now in order to make prompt payment once these purchases have been charged. Also, give yourself a budget for those items based on how long it will take you to pay them off — preferably no longer than 2-3 months.
9) Avoid shopping as entertainment. If exercising your credit card at the mall is your idea of a good time, it might be time to cultivate some less expensive personal interests. Try volunteering with a local not-for-profit organization.
10) If you are shopping with a credit card, do it thoughtfully — pick your sales and comparison shop. These days, department stores seem to run sales every week. It’s good to take advantage of these opportunities, but be sure to ask yourself, “Would I buy this if it wasn’t on sale?” And always comparison shop for the lowest prices, particularly on large-ticket items.
11) Make sure you can afford all the fun you’re having after work. If you tend to use your card to pay for expensive restaurant dinners or other “extra curricula” activities, set a monthly limit on this type of spending and then plan your social calendar accordingly.
12) Make a list of special occasions that carry added expenses. You’re just now dealing with bills from the holiday season, so it’s a good time to make note of what you’ve spent overall and plan accordingly for next year. The same strategy should apply for birthdays, anniversaries and other occasions. Planning will help ensure that you always have enough available credit, without exceeding your own pre-set limit, to handle these expenses.
Finally, if you’re still having trouble gaining control over your credit cards, don’t be afraid to ask for help. Your local Consumer Credit Counseling Service (CCCS) will work out a credit management plan that is tailored to your needs. Find the branch nearest to you by calling the National Foundation for Consumer Credit at 1-800-388-2227.
Citibank is the largest issuer of MasterCard and Visa in the country, with over 38 million cards in circulation.