Holiday gifts should last longer than the credit card balance
By Lucy Lazarony • Bankrate.com

When will many Americans break free from this year's Christmas credit card debt? Not until next July.

While most people say they'll pay off their holiday credit card bills in two or three months, it actually takes them six, according to the American Bankers Association. It's what personal finance experts call "a holiday hangover."

Now is the time to plan
"It's a combination of not planning and not thinking about the financial impact," says Suzanne Boas, president of Consumer Credit Counseling Service in Atlanta. "Very, very few people have sat down and tried to get their hands around holiday spending and more and more of those incidental expenses are going on credit cards."

It's never too early to get a grip on this year's holiday spending.

A big part of the problem is the December holidays aren't just about gifts. There's decorations, holiday clothes, parties and trips, special concerts and plays, postage for all those cards and parcels and, of course, all that food.

"The obvious solution is not to spend a lot of money," says Ray McAlister, a marketing and credit management professor at the University of North Texas. "But Christmas is Christmas. It's important to a lot of people."

Add up last year, work from there
The first step to making the holiday season hangover-free is tallying up the cost of last year's holiday.

"Whether it's going to cost you $300 or $1,000 or $3,000, at least you have a starting point," Boas says. "You can pare it down or save up for it from there."

Experts suggest saving money for the holidays as early in the year as possible and limiting credit card use. The rule of thumb: Only charge what can be paid in full within two or three months.

Linda Sherry, editorial director for San Francisco-based Consumer Action, a consumer advocacy group, also urges people to steer clear of department store credit cards.

"They can be tempting but they have very, very high interest rates," Sherry says. She adds that debit cards, which yank money directly from a person's bank account at the checkout counter, can be a good way to stay on budget because "you pay as you go."

"It's not very romantic to shop for Christmas in July but it will save you money," McAlister says. "Shop the after-Christmas sales for next Christmas."

Do everything to avoid falling into the trap of the weary, last-minute shopper who buys expensive and sometimes frivolous gifts just to have something -- anything -- to give.

"So many people that wait until the last minute buy all these things with money they don't have," says Steve Rhode, president of Myvesta.org, a counseling service for people in financial crisis.

And the closer to the holidays, the worse it gets. Rhode recalled watching a man purchase a $400 phone on Christmas Eve just to have something to bring home.

Don't trust your impulses
Rhode emphasizes the importance of shopping early and with a list.

"With any type of impulse shopping you're going to end up buying a lot more than if you make a list," he says.

Another way to keep holiday spending from spinning out of control is simply knowing when to stop.

"When is enough? Where is the finish line?" Boas asks. "If you don't have an end, you're going to keep going as long as the stores are open. I wonder how many Christmas Eve shoppers are people who can't find the finish line."

-- Updated: Dec. 2, 2002