Holiday Season Credit Can be Costly
Most consumers tend to take more credit in December and January to help them pay for holiday gifts, food for all those family get-togethers and the dreaded all too soon start-of-year expenses. This can place families who are perhaps already struggling under added stress when trying to manage their finances. They might even make some bad choices which will later effect their credit rating or credit score. However there are things consumers can do to keep the over all cost of credit down and to keep their credit score looking healthy. Here are 7 small, easy steps to take to reduce the cost of holiday season credit.
7 Tips On Reducing How Much Your Credit Costs You
- Choose a short repayment period
A longer repayment period allows for a lower monthly installments but, because of the interest charged, you’ll end up paying more overall. Choose the shortest term that you can afford to repay and it will save you funds in the long run.
- Look at how much interest you will pay
A low interest rate doesn’t necessarily mean it’s the best deal. Consider all the factors; look at the interest charged over the credit term. Paying a lower interest rate over a longer term (time period) doesn’t necessarily mean that you’re getting the best deal. Weigh the interest charged over a shorter term with that of a lower interest rate charged over a longer term.
- Pay more than the minimum amount due
It can be tempting to just pay the bare minimum on your credit each month. It can also lead you into spending money on other things and allowing your credit to cost you more over time. Try to pay a little extra onto your monthly installment. You don’t have to pay a large amount; even a small amount extra makes a difference. Credit is expensive; the interest charged on credit contributes to the overall cost. By paying more than the installment amount, you pay the interest off quicker and bring down the capital balance (the original amount borrowed before interest is applied).
- Don’t Skip Payments
Contact your credit provider and make a payment arrangement if you are unable to meet the agreed monthly repayment. If you skip a payment, it’s recorded at the credit bureaus. This could give you a bad payment profile; affecting your future credit applications. It could also mean that you’ll be charged higher interest rates on future credit applications from all credit providers.
- Pay on time
Always make an effort to pay your credit installment on or before the due date to avoid additional charges. In addition to negatively affecting your credit rating, interest or penalty fees may be charged on overdue accounts; increasing the cost of your credit. Choose to repay your credit with a monthly debit or stop order. You don’t need to remember to pay your installments, and will avoid paying late payment fees.
- Reduce unnecessary credit limits
If you have a high credit limit, it’s likely you’ll end up spending it.Be honest now…you know you will. Relook at all your credit limits, including your retail account cards. If you don’t need a high credit limit, why not reduce it?
Your budget is your money plan. Use it to work out what you’ll be spending and where you’ll be spending it. Along with gift and food costs, include things like traveling, entertainment and other related expenses too. Once you have planned that out you will know how much you will spend over the next month. If you notice you are spending too much on one item try cut back. Sticking to your budget means you might not need to take credit at all, saving you from paying on debt you may not be able to afford.
Too Deep in the Debt Trap? If you do all that you can and find you still can’t manage then it might be time to talk to a professional. Debt Counsellors have offices around the country and most won’t charge you a cent to sit down and talk about your finances. If things are really bad they will be able to advise you on the best ways to handle your situation.