SACRAMENTO - It's not hard to go over your budget during the holidays, especially when all it takes is a swipe of a card. But come January when the bills start rolling in, you may be faced with a mountain of debt. Thankfully, there's a very simple method that should prevent you from getting in too deep.
It's called the two-card strategy and is explained on credit.com. The plan recommneds you use two different credit cards for your spending. One is called a "clean" card, and the other is a "line of credit" card.
The "line of credit" card is to be used only for major emergencies, like pricey auto repairs, a health related expense, or expensive holiday shopping. You save it for occasions when you won't be able to pay off your bill. Once your splurge is over, you stop using the card and you toss it in a drawer until it's paid off in full.
The "clean" card is for regular purchases that you make everyday. You never spend more on this card than you can pay off every month.
This method is effective because it preserves that grace period that you get on every credit card purchase you make where you can pay off purchases free of interest.
Financial author Bob Sullivan said if you find yourself carrying a balance this holiday season, think of it as a member of your financial family having a bad cold. He says, "Quarantine the sick child from the rest of your family, pay the balance off in a few months, and you'll minimize the damage. Let that sick card infect the rest of your finances, and now you've got a full blown outbreak on your hands."
According to the National Retail Federation, this year the average American will spend $737.95 on gifts, décor, greeting cards, and more.