By LISA HAARLANDER
Buffalo News Business Reporter
8/16/2004

Right now, you're probably more concerned with paying off your summer vacation than thinking about Christmas shopping. But Christmas is a financial fender bender in many American households because it's the season to spend. And now is the time to avoid this annual accident.

The average U.S. household has $9,205 in credit card debt, according to industry tracker Card Web.com. Much of it is racked up during the holidays. Ten years ago, the average household had $3,646.

On a card charging 12 percent interest, the average household is paying more than $1,000 a year in interest. Compare that with the $672 on average a person spent on the holidays last year, according to the National Retail Federation.

It's now easy to see why the holidays seem to have become a bigger and bigger strain on the budget. Eliminate that debt and you would automatically have an extra $1,000 for presents and parties.

While you're paying down your debt, it's also wise to start planning to stay out of debt. Nothing is more demoralizing that chipping away at that credit card bill dutifully for months only to splurge in December and have to start all over again.

If you normally spend $1,000 for the holidays, you would need to save $83 per month. But since it's August, you would have to save $200 per month.

If you're already in debt, you probably don't have an extra $200 per month to stash away in a Christmas account. But it's still August and you've got five months until Christmas rears its ugly head. Take advantage of summer sales. I recently picked up a book in the bargain bin for 50 cents that will be a Christmas gift for a fan of the Buffalo Bills. In December with deadlines looming and desperation growing, I probably would have walked into a book store and shelled out $10 or more. Anything to have something under the tree.

"I'm a big fan of spreading out the shopping," said Jim Tehan of MyVesta, a consumer education organization. "The earlier you start, the easier it will be on your wallet."

In addition to saving money, starting your Christmas shopping early will reduce stress and may lead to more thoughtful gifts. Do you actually remember what all your friends and family gave you for Christmas last year?

Here's another tip from MyVesta: Pass on getting a store credit card just to save 10 percent on one purchase.

"You don't need another credit card, and often store cards have higher interest rates," Tehan said.

Stick with two major credit cards, he advised. Keep one with a zero balance and use it for purchases that you know you can pay for right away. Use this card to earn cash back or frequent flyer miles. Keep a second card that has the lowest interest rate you can find. Use this card for purchases that you know will take you several months to pay off.

Now, start making that gift list.

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