Good Morning Everyone.  Today we are following up on yesterday’s post about How Students Can Live on a Budget during the Holidays.  We should try to stay on a budget while shopping during the holidays; and to avoid overspending we should try to pay with cash instead of our credit cards.  Today we are helping everyone try to avoid the temptation of using their credit cards while shopping during the holiday season and all year round.

I know that we may want to buy nice gifts for our family, and we may also be tempted to buy gifts that we can’t afford.  But at the end of the day there is no use in paying for our purchases with our credit card if we can’t afford to pay off the balance at the end of next month.

Here are 5 Tips on How to Avoid Temptation When Using our Credit Cards:

1. Cash is Easy to Budget. If we only have $40 in our wallet then we can only spend $40.  There is no chance of us overspending if we always live on a cash budget.  We can keep money in our bank accounts and earn interest on our money, instead of paying interest on our credit card balance.

2. Think About Saving Money.  It is no secret that not using our credit card can save us money.  We may be tempted to spend money just because we have an available credit card limit. When we spend money on our credit cards we have to repay the money that we spent and we will also be charge interest on our credit card balance.

3. Cash Advances Can Be a Killer. Interest is charged on our cash advances from the moment we withdraw the money, there is no interest free grace period on cash advances.  When we make payments to our credit card the money is used to pay off the oldest transactions first, in the meantime we are still being charged interest on our recent cash advances.

4. Carrying a Balance Can Hurt Our Credit Score.  We should use our credit card to help us establish a good credit score.  When we use our credit card and pay off the balance each month we establish a good credit score.  However, if we continue to carry a balance on our credit card each month we can actually be hurting our credit score.  When we apply for a car loan or a mortgage the bank is going to look at our credit payment history, our credit score, as well as our current credit card balances.  If we owe too much money on our credit cards then our mortgage application may not be approved.

5. Cash is Hassle Free.  If we pay for everything with cash there is no need to worry about identity theft or about fraudulent charges. When we pay with cash there is no chance of being charged extra, overspending, or worrying about keeping track of our budget.  If we withdraw the maximum amount of cash that we want to spend from the ATM before we go shopping then we can never overspend.  Having unlimited access to money via our credit card causes the temptation to spend, but we are trying to avoid it.

Photo by Bulinna

Tahnya Kristina

Tahnya Kristina

Tahnya is 30 years old and lives in Montreal Quebec. She graduated in 2005 from Concordia University, and she currently works for a major International Financial Institution. She recently launched You can follow her on Twitter @TahnyaP.