Spending Limits Are Important, Even When You're Charging

Before going on a shopping trip, one of the first things you do (or should do) is figure out how much money you’re able to spend. You check your current account balance, consider what bills and income you have coming in the next few weeks, then decide what you can safely spend. If you haven’t been following that (or a similar) plan when you shopped in the past, keep those steps in mind for your future shopping trips.

With credit cards, we tend to do things a little differently, especially with big shopping events like Christmas and other winter holidays. There’s so much subtle (and overt) nudging to spend that you can easily forget about boundaries. A credit limit is the only thing stopping some people from literally shopping until they drop – or until their card starts getting declined. But using a credit card doesn’t mean you can shop without limits, even if you have a card with no preset spending limit. You may not have to consider upcoming bills when you’re using your credit card, but there are still some drawbacks to running up your credit card balance.

You’re going to have to pay back what you charge, not all at once of course, but even minimum payments can be tough to make. The higher your balance, the higher your minimum payment will be. You don’t want your minimum to be so high that it’s hard to pay. The higher your balance, the higher your finance charges will be also. You’ll pay more in interest and it will take longer to completely pay off the balance – if you ever do. Some people carry their holiday balances all year long and put more debt on top of it when the next holiday comes.

It’s just not smart to get yourself into a lot of debt for a day that comes once a year, especially considering that there’ll be another one next year and the year after that, and son on.

Many people who go overboard during the holidays end up regretting it once the New Year comes and they see just how much damage was done. It’s worse when you make the payment month after month and seem to make no progress.

This year, be more cognizant of what you’re spending. Set a limit, even if you’re using a credit card, especially if you’re using a credit card. Imagine you were spending cash, what would your budget be? Your credit card spending limit should be pretty close. Also take into consideration your current card balance and available credit. Obviously, you can’t (or rather shouldn’t) spend more than your credit limit, so the amount of credit you have available will play a big role in your spending limit.

Setting a spending limit may be easy, but the hardest part, for many people, is sticking to it. Be aware of how close you are to your spending limit and stop when you reach that point. Be careful about making exceptions to go over your limit. Though it may be self-imposed, you set the limit for a reason – to avoid financial problems later. Limiting your purchases may be hard, but once it’s January, you’ll be glad you did.