Black Friday is big business—last year, Americans spent a staggering $52 billion on Black Friday, with the average person spending just over $420. Cyber Monday, which is the Monday after Thanksgiving when online retailers have significant sales, is also a big shopping day; shoppers spent around $1.5 billion last year, and that amount is expected to grow this year.
There’s no question that some of the best sales and deals of the year can be found on Black Friday and Cyber Monday. The real question is, can your finances handle a shopping spree?
Think Before Reaching for Your Credit Card
If you’re planning on funding your shopping spree with your credit cards, tread carefully. You should probably avoid loading your credit card with holiday deals in these situations:
- Your cards are already at their limit. If you have multiple credit cards that are maxed out, or close to being maxed out, it’s best to wait until you can pay cash or you’ve paid down your cards before making any big purchases. High balances on your cards can lower your credit score and indicate an over-reliance on credit.
- You have to open new cards to fund your buys. Retailers are great at drawing people in with credit card offers, especially on big shopping days. If you need to open new cards in order to pay for your Black Friday deals, your finances would be better off if you skipped the shopping.
- You won’t be paying the balance off in full. No matter how amazing the sale is, carrying a balance on your credit card will most likely negate any savings. For example, let’s the TV you’ve had your eye on has been marked down from $1500 to $1000. Because it’s a deal you can’t pass up, you charge it to your credit card. If you only pay the minimum payment, it will take you over 9 years to pay off, and you’ll end up paying $923 in interest.
Smart Shopping Tips
Whether you’re using cash or credit to fund your Black Friday shopping spree, these tips will help you spend smartly so you don’t end up further in debt:
- Check your budget. Before you go shopping, check your budget and see what you can actually afford. You never want to be late on bills or go without necessities just to score a few deals. If your funds are already accounted for this month, skip the shopping.
- Set a spending limit. Once you’ve gone over your budget, decide how much you can afford to spend and stick to it. If you’re easily tempted, leave your credit cards at home and take cash instead.
- Make a list. Instead of just blindly grabbing at things, check the ads beforehand and make a list of the things you want to buy. You can also sign up for email alerts from your favorite stores so you know exactly what their Black Friday and Cyber Monday deals should be.
- Have a plan to pay off your balance. If you do charge some or all of your purchases to a credit card, make sure you budget in a way that will allow you to pay off the balance before you’re stuck with hefty interest payments. This is especially true if you took advantage of a no interest introductory rate. Often, when the no-interest period ends, you’re stuck with back interest as well.
If you plan to take part in the Black Friday madness or Cyber Monday shopping, make sure to plan ahead and know whether or not you can really afford the things you want to buy.