Okay so most financial bloggers will say don’t spend your money and save it instead. I believe in this too, but come on, it’s CHRISTMAS! It’s that time of year when your supposed to buy gifts, and spend time with friends and family! So in this article, I will show you a way how Christmas shopping can help you save this holiday season.
BURN YOUR CREDIT CARDS?
When you are shopping you have a choice to use cash, debit card, or credit cards. Often times, people say to avoid using credit cards at all costs! There is some truth in this. A reason why credit cards are so dangerous is that it gives people a false sense of money. Some people think the money that they have is based on their monthly credit limit , and they end up spending more money than they have. Credit cards also have one of the HIGHEST interest rates with an average interest rate of 18% with a high of 26% that compounds not monthly but DAILY.
So even though credit cards can be “dangerous” if used properly, I credit cards can actually be a tool that can help you SAVE money.
Safety Proof your Credit Cards:
1. To avoid obtaining a false impression of money, set up a strict credit limit. Look at your usual spending on mandatory expenditure, and set that number to be your credit limit. Don’t be fooled when the banks call you to increase your limit to some unreasonably large number.
2. Next, set monthly/weekly reminders to pay your credit card bills. Forgetting to pay even for 2-3 months can have large consequences due to the high daily interest rates.
If you follow these 2 steps, credit cards are harmless!
Save on Shopping
Credit cards can help you save are through the rewards/points you get from your purchases. But I’m not talking about the rewards where you get to buy random things that you would not otherwise buy. If the points are used to buy extra things that you would not otherwise buy, than it’s just incentivizing extra spending.
What I like to do with my credit cards are to redeem the reward points where they get transferred directly into my TFSA or RRSP account. That’s why even though, I am spending money on buying gifts this season, at least a portion of that money will be re-invested and contributed to my savings. The credit card that I do this with is RBC, but I’m sure other banks do this as well.
So this Christmas, don’t cheap out too much on buying gifts for your fam and friend, just make sure to use your reinvest your credit card reward points, but remember to set a credit limit and pay your monthly bill!