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A Costly Christmas Surprise

chocolate-phone.jpgWhat is the most expensive single item on your list of Christmas spending? That special gift for your spouse? The latest electronic gizmo for your teenager? Your family’s holiday travel?

Or could it be something you didn’t even know you bought? For some Christmas shoppers, the most expensive holiday purchase could be interest.

It’s all too easy at this time of year to hit the stores, plastic in hand, and end up spending more than you had planned. The crowded stores, the sense of urgency to find the right thing for everyone on the list, the barrages of advertising, and the tempting arrays of “bargain gifts” can seduce us into impulsively buying stuff we had no intention of getting.

A battery-operated eyelash curler? Just the thing for teenage nieces. A snow shovel with a heated blade? Get one for Uncle Ed. The gift-boxed little bottle of expensive lotion? That will do for Grandma. Check off the names, and on to the next store, until at last everyone is accounted for and you can breathe a sigh of relief.

In January, however, that sense of relief can come to an abrupt and painful end when the credit card bills show up. All those purchases that were “just a little bit more than I planned to spend” can add up to a bill that is too credit-card-theif.jpgmuch to pay off in one, two, or even three months.

If it takes until June or July to pay off the balance, you’ll be paying hefty interest charges on top of the purchase price of the gifts. That talking electronic picture frame could end up costing 25 percent more than its sale price of $19.95—not such a bargain after all, especially if it quits working three months before you finally get it paid for.

For next year, why not try to cross “Interest” off your Christmas list for good? The following steps can help.

First of all, as you pay off your holiday credit card bills, keep careful track of the interest you pay. Make a list; check it twice. Really pay attention to how much that interest adds to the cost of your purchases.

Second, notice what you do in order to pay off the bills. What other items in the budget do you squeeze, shove over, or get rid of in order to make room for the credit card payments?

Third, understand that, if you can manage to pay off the bills after Christmas, you could also manage to save the same amount of money before Christmas. If you can make a $50 or $75 or $200 credit card payment for several months after the holidays, why not commit instead to making those payments before the holidays?

Once you have the credit card account paid off, keep paying that same $50 or $75 or $200 into a savings account every month. Then, by the time the holidays come around next year, you’ll have a gift-buying fund to draw from. Instead of adding to the cost of your gifts by paying interest, you’ll be increasing your buying power by earning interest.

credit-cards.jpgThen, when you go shopping, leave the credit cards at home. Write checks for what you buy, or take your savings with you in cold, hard cash. As you buy gifts, subtract the cost of each item from your total Christmas gift budget. Those extra impulse bargain buys will probably be a lot less tempting.

True, your mom might need to do without the talking picture frame. But just take her out to lunch in January instead. With no credit card bills to pay off, you’ll be able to afford it.

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