Opinion: is it right we go into debt at Christmas to satisfy our families, friends, and neighbors for tradition?

Karen Madej

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VISA, Mastercard, and other credit card companies know how to catch you and keep you paying. Usually, the minimum amount every month with little to no chance of ever paying the whole amount off. Not unless a rich relative leaves you their fortune.

I believe going into debt for anything other than the property where I live is weak and foolish. I know; I've done it myself. Credit cards maxed out, and debt shifted to another at zero % interest and a higher borrowing amount every six months.

Looks like Advice You Can Trust From Clark Howard and Team is the American equivalent of the UK's secret weapon. His name is Martin Lewis. He's the Money Saving Expert. He appears on the TV, regularly advising British folks how to pay off debt using the snowball technique made famous by personal finance author Dave Ramsey.

Pay off your credit cards

Pay the minimum amount for all your credit card debts every month - except one - the smallest. Throw as much as you can afford at the smallest card debt until it's paid. Have a small celebration when it's gone. Move on to the next smallest. Repeat until all cards are settled. The snowball way has a feel-good factor because you are likely paying off smaller debt more often.

The drawback of the snowball method is that it doesn't consider interest rates. Here's where you can try out the avalanche method. Yes, that's right, start with the biggest interest rate amount on your credit card or in loan form. You'll save more money, but it may take longer to settle. You might even lose motivation.

Martin doesn't suggest buying big-ticket items (or Christmas) on your credit card unless you get some reward and pay the balance in full the next month.

I paid the deposit for a Bulgarian studio apartment on one of my many credit cards a long time ago because I could.

I worked for a popular corporation, and credit companies fell over themselves to give me loans and overdrafts. Then the financial crisis hit, and I lost the deposit and the apartment. I didn't see that coming!

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In my opinion, credit cards are for stuff you want, those moments when you throw caution to the wind, also for what your family wants or your best friend wants. They aren't about what you need. Or they shouldn't be.

Debit cards

A debit card is for need. For bills, for food, for your mortgage, or rent. However, Clark makes a very good point about using a credit card for purchases because of the added protection you get in the US.

UK banks have excellent fraud teams. When I've stupidly fallen for a win an iPhone 12 and entered my bank details for postage costs before I realized it was too good to be true, I've called my bank, and they took control of the matter and canceled my card at my request instantly.

I have three debit cards. One for everything I need for the month. One for emergencies. And the third is for different currencies. Some folks have a fourth to split out food and bills.

Martin Lewis reckons on five accounts in his Budget Planner:

  • Bills (including mortgage)
  • Big purchases (sofa, car, kitchen)
  • Holidays
  • Christmas
  • Savings & emergency fund

Plan for emergencies

We can't see what's around the corner. Wise advice says to make sure you have saved three to six months' worth of living expenses. Have you? I haven't. But I am working on it. I live on £800 per month. My only regular outgoings are food, rent, and utilities. If I want extras, then I have to earn them.

Do you think I'm buying a Lamborghini for my son this Christmas? That's right, no. He's getting socks because he asked for them. I found him a multipack of colorful bamboo fiber crew socks.

When I found out Amazon is exploiting small businesses by charging 34% of their products' revenue, I wish I hadn't bought the socks from Amazon.

In 2014, the online trading mammoth charged 19%. In 2019, Amazon's total cut was $60 billion. Since then, seller's fees are expected to have doubled to $121 billion this year.

ILSR reports that Amazon is so big now small businesses would go out of business if they didn't sell through the dominant online selling portal.

Stacy Mitchell from ISLR writes that House Judiciary Antitrust Subcommittee Chair David Cicilline said:

“This important study makes clear that Amazon is crushing sellers through abusive policies that make it nearly impossible for everyday businesses to get ahead.”

I want an iPad

My choice where buying stuff is concerned is not to take out a loan to buy a family member an iPad, especially when the young mom buying it has given in to her demanding daughter. The young mom doesn't even know if she will have a job next year.

Giving into family or peer pressure these days is not necessary. We can choose instead to live within our means and not have the worry of debt hanging over our heads. Wanting to splash out because it's that time of year might be more about tradition. Something we've always done and therefore have to keep doing. But why?

According to the UK National Debt Advice organization, one-third, or 16.9 million of us, borrow money to pay for Christmas gifts. Nearly 11 million of us will put our festive food on credit. One in twenty Brits will skip paying a bill over Christmas and face late payment fees in the New Year.

Cardify in Buying the Holidays Now, Paying Later has kept track of spending throughout the pandemic. It surveyed 2000 buy now pay later (BNPL) users and found that 45.1% plan to pay for all or most of Christmas using BNPL as their third choice of payment. Debit cards came in first (65.7%) and credit cards second(54.6%).

You've probably noticed Klarna offering three payments to break down the shock on your wallet while deciding which payment method you'll choose; it's now the leading BNPL provider. Although Klarna offers interest-free payments, it's causing higher spending.

Among those who plan to use BNPL this holiday season (“Holiday BNPL Shoppers”), 46.6% will use BNPL for more than half (37.8%) or even all (8.6%) of their holiday purchases. Cardify
Holiday BNPL Shoppers are also more likely to increase their total holiday spending this year relative to the last holiday season, with 26.2% of this group planning to spend more this year compared to 21.3% of those who don't plan to use BNPL.

What's worse is that 45.8% of BNPL shoppers said that if BNPL were not available, they would be forced to spend less. The ability to make three interest-free payments encourages higher spending.

Why would anyone willingly choose to go into debt for Christmas gifts?

Is it the dream of that perfect December 25 sitting around the Christmas tree, shaking boxes, guessing what Santa dropped down the chimney, and the faces that light up when their wishes (wants) come true? Do people still play at the I'm richer than you game, look what I can afford to buy, while less well-off folks try desperately to keep up with them?

We could go back to an orange, a wooden toy, or a coloring book. How out of the box would that be? And how happy would your bank account be in January?

Regrettably, I think too many folks are committed to investing in what they want but don't need because they always have. And pay the price. Not to mention making Amazon and credit card companies richer.

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Passionate about climate change and living a debt-free, sustainable life. Determined to learn how to and build an adobe house or Earthship. The goal is to live off-grid and off the land. Energy for heat and to power electrical devices and appliances will use solar, wind, and hydro-powered electricity. No trees will die to make my home.

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