The Best Way to Pay Off Holiday Purchases Over Time

For many of us, the holidays are the most expensive time of the year. Holiday spending is expected to reach a record high of $902 per person this year, according to the National Retail Federation.

It's great if you can pay for everything in full with money from your savings. But if you'll need to pay off your holiday purchases over time, there's a way you can do it without any interest charges.

Use a 0% APR credit card to finance your holiday purchases

The best way to pay off holiday purchases over time is with a 0% intro APR credit card. This type of credit card has a 0% APR for an introductory time period. You can use it and carry a balance, without paying any interest on it until the intro period ends. Some cards have intro periods lasting as long as 21 months -- click here to see our list of the top 0% APR credit cards.

For example, perhaps you expect to spend $1,500 over the holidays, and you won't be able to pay it off immediately. If you go that far into debt with most credit cards, it will cost you quite a bit of interest. The average rate on credit cards that are assessed interest is 23.37%, according to Federal Reserve data. At that rate, a $1,500 balance costs you about $351 in yearly interest.

Instead, let's say you open a credit card with a 0% intro APR for 15 months. Now you can pay off that balance with monthly payments of just $100. If you want to pay it off faster, you could put $300 per month toward it and be out of debt in just five months. Either way, it won't cost you any interest.

It's an easy, stress-free way to finance holiday expenses. If you're looking for this type of card, check out one of our top picks with a 0% intro APR and big cash back rewards.

How to make the most of a 0% APR card

When you're borrowing money, a 0% intro APR is hard to beat. However, these offers can backfire. Some people overspend and don't get their debt paid off in time. Others don't keep up with their payments and get their 0% intro APR canceled.

Whether you come out ahead or not depends on how you use your 0% APR card. Here are a few tips to ensure it ends up helping you and not hurting you.

Stick to a spending limit

Before you spend any money, set a budget for yourself. This should be an amount you're comfortable spending and that you're confident you can repay within your card's intro period.

If you try to figure this out as you go, you could end up overspending. It's always tempting to spend more during the holidays, and if you haven't set a limit for yourself, there's not much stopping you from making impulsive purchases.

Make a payment plan

Decide how much you'll pay per month toward your credit card. At a minimum, this should be enough to pay off your balance before the 0% intro APR ends. If you don't do that, you'll be charged interest on your remaining balance. You may want to commit yourself to a larger monthly payment if you'd like to be debt-free sooner.

Don't just make the minimum payment required by the issuer every month. On large balances, you're normally only required to pay a small minimum amount of 1% to 2%. You almost certainly won't have your balance paid off during the intro period this way.

Always pay your credit card bill on time

This is a smart habit with any credit card. It's good for your credit score, and you avoid late fees. But paying on time is especially important when you have a 0% intro APR credit card.

If you miss a payment, the card issuer could decide to cancel your 0% intro APR. Your card's APR would jump from 0% to its normal rate and start costing you interest every month.

Sometimes you need to borrow money for a short time to make the holidays extra special. A credit card is a convenient way to do that. And if you find a credit card with a 0% intro APR, that could be the most affordable way to do it.