Avoiding credit card debt when internet shopping this Christmas.

8th December 2010

Online credit card expenditure is expected to be higher than ever this Christmas. We look into ways to avoid building up debt and interest charges that become unaffordable in the New Year.

Sainsbury’s Finance recently published analysis suggesting that on average people spend £200 online every month, with around 1.2 million people spending more than £1000.

These are average figures throughout the year, in the run up to Christmas you can be certain that many internet shoppers will be spending much more than they usually would.

Failing to record of spending

A major difficulty with using a credit card is that, for many of us, it is easy to spend more than you can afford. Unlike cash purchases we do not immediately feel our wallets or purses getting lighter.

Spending on a credit card does not provide the physical sense that the money you have available is reducing. It is therefore easy to lose track of how much you have spent in total.

Shopping with a credit card on the internet may worsen this problem.

When physically in a shop, you are given a till receipt which is at least a record of your spending. However, when you shop online, there is no ready record of your transaction other than an e-mailed confirmation which are easily overlooked or simply not read.

Using a money diary

When failing to keep an eye on what we are spending, it is very easy to go beyond our budget and generate a credit card debt which is unaffordable when the bill arrives in January.

If you pay less than the total balance on your card, or just the minimum repayment, we are left with expensive interest charges which can easily reach 30% or more.

If this situation continues, we can easily reach a point where it is no longer possible to repay the debt. At this point serious measures such as a protected trust deed may be required.

One way to reduce the dangers of overspending on your credit card is to record a money diary. This is a simple record kept each time you use your card. This can easily be used to keep a running total of spending and the total that you owe.

Understanding your budget

However, keeping a money diary will only help if you have worked out the budget you can afford to spend. For this reason, before you start any online shopping, decide the maximum amount that you can afford to spend in total.

If you have a number of people to buy presents for, divide your budget between them to give you a clear idea of how much you can afford to spend on each.

As you shop, record everything you spend in your money diary, and deduct this spending from your Christmas budget balance.

By following this process, you can easily keep track of your spending and know when you are getting close to spending an unaffordable amount.

Using your credit card to buy your Christmas gifts online can be very convenient and also very cost effective. However, if you spend more than you can afford to repay in January, the interest you will be charged will quickly offset (and then exceed) any savings you make.

Setting a budget before you start your online shopping, and keeping a money diary will help prevent an overspend, will help you to avoid a financial headache in the New Year.

What if it’s too late?

Debt advisers and trust deed companies are always extremely busy in the months following Christmas. The Christmas period is a notoriously expensive time for many households.

It should therefore come as no surprise that in the months following the festive period some people struggle to maintain their newly increased debt repayments.

A range of debt solutions exist for Scottish residents to deal with unmanageable debt. The most important things to do are to find a reliable source of advice and to contact them as soon as possible.

Failing to deal with unmanageable debt tends to result in a worsening of the situation which can lead to long-term difficulties that otherwise could have been avoided.

Contributed By:

James Falla

BeatMyDebt.com

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