Once the wrapping paper has been discarded, and all the new, shiny presents enjoyed and put away, examining your credit statements is the next order of business.
According to Money Geek, 65% of holiday spending in 2021 was paid for with credit cards, and the more credit cards someone had the more of their spending was used with credit. The survey also found that 40% of people in the U.S. had not paid off their debts as of February 2022
If you didn’t like what you saw last year, there’s still time to be proactive this holiday shopping season. By avoiding these four credit card mistakes, you can help yourself make it into the new year without crippling debt and shopper’s regret.
- Approach store credit cards with caution.
While saving 10%–20% can potentially save you quite a bit on a purchase, opening a store credit card is often a bad idea. Not only do they have a reputation for having high interest rates, but when you open a card, you trigger an inquiry into your credit. Inquiries stay on your credit report for up to two years, and too many can impact your credit score. Another negative? If you pay less than your minimum payment, many store brands will charge you a late fee as if you completely missed the payment.
- Maintain a budget to keep from racking up your credit cards.
Using budgeting apps like Stash or Rocket Money can help you track your purchases over the season so that you know when to stop. You’ll also want to avoid racking up charges on multiple cards and reducing your credit utilization ratio. Your credit score can be negatively impacted if you use over 30% of your available credit.
- Fail to use credit card rewards correctly.
One of the benefits of using credit cards during the season is the rewards you can earn. For example, if you have a credit card that rewards you for dining out, you can use that card for purchasing gift cards at restaurants. Just make sure you don’t overdo it on expensive purchases just so you can get points.
- Don’t be tempted by cash advances.
Credit card lenders often send out cash-advance offers during the holidays. These may seem like a good idea, especially if you’re looking to have more cash on hand to pay bills. But these deals come with fees that usually cost 3%–5% extra on the total advance, as well as APRs as high as 25%.
Non Profit Credit Counseling
Speak to a credit counselor if you can’t make your minimum payments.
If you’re losing sleep over you finances and are struggling to make the minimum payment on your credit cards, make an appointment with a credit counseling professional. Not only can they help you create a budget that works for you, but they can also offer educational resources and tools to help you manage your finances better. They may even recommend you enroll in a debt management program, which can help you lower your interest rates and consolidate your loans into one affordable monthly payment to be paid off in three to five years.