Setting a budget for holiday shopping is essential to avoid overspending, especially when it comes to utilizing credit cards. The debt you rack up can take months to pay off. Remember, the money spent on credit cards is not free money and, if not paid off within the billing cycle, interest continues to accrue. If you charge $800 on your credit card and only pay the minimum monthly payment at an APR of 24.99%, you end up spending much more for those great holiday bargains. Consider the following illustration:

It is easy to overspend when you use a credit card. It may seem like a good idea to pay with plastic or a mobile device, however, if you are not careful, you can easily blow your budget. It is also important to keep track of spending, because you do not want to go over your credit limit. Piling on high-interest credit card debt is not worth it. Experts recommend keeping credit card balances below 30% of the credit limit to maintain the highest credit score.

According to the National Retail Federation, consumers will spend $804.42, up 5% over last year’s actual $767.27 on holiday shopping. Upromise by Sallie Mae surveyed 500 parents and determined that only 44% of parents expect to stick to their budget when shopping for their children this year. Furthermore, 27% of parents will not set a budget.

Creating a budget helps you to stay disciplined in terms of holiday spending. It provides self-imposed boundaries, so you spend what you can actually afford. Everyone should spend according to what is appropriate for their particular financial situation. Use your debit card or perhaps a prepaid card earmarked for holiday purchases. Try a more proactive approach and set up a savings plan earlier in the year, such as a holiday club savings account. Most banks and credit unions have these type of accounts available to ease the stress of saving for holiday spending. These habits can help you stay on task.

Also, remember to include holiday decorations, parties and extra money spent on food during the holiday season into your budget. Rely on your list and stick to it! It will keep you out of trouble. Make a list, check it twice! Don’t be naughty!