During the holidays, it can be tough to maintain good credit. It’s the season of giving and we all want to make loved ones know just how special they are to us. With so many amazing deals, it’s tempting to swipe your credit card just because you can.
The good news is that holiday shopping doesn’t have to put you in a credit slump that lasts into the new year. Here’s what you need to know about protecting your credit when shopping for the holidays.
5 Holiday Shopping Tips to Save Your Credit
1. Track Your Credit
One of the biggest factors that impact your credit score is credit utilization. For example, if you have $20k in credit but you’re using $10k, your credit utilization would be 50%.
Ideally, you want to keep your credit utilization under 30% at all times. The lower, the better.
When shopping during the holiday season, set up alerts through your credit provider so that you can keep track of your spending.
2. Pay Off Your Card
The longer you let your credit card balance linger, the more likely you are to pay interest fees. If possible, pay off the entire bill as soon as possible. This way you aren’t stuck being charged interest or late fees on your purchases.
If you have a low credit limit, consider making several payments throughout the month to keep your credit utilization low. In turn, your credit score is less likely to be impacted by your purchases.
3. Set a Spending Limit
Credit cards are extremely tempting when holiday shopping. Swiping your card is effortless and having thousands of dollars at your disposal is often a recipe for disaster. Before venturing to the mall or browsing your favorite e-commerce store, set a spending limit and stick with it.
Before setting a limit, figure out how much you can pay. Look at your budget and determine how much money you can afford to spend on gifts. Be sure that your holiday spending doesn’t interfere with savings or paying your bills.
4. Put Your Rewards to Good Use
Many credit cards offer rewards when you buy products from certain categories or retailers. Look at where you spend most of your money and use the card that rewards you for your shopping habits.
Most credit card companies offer cashback offers, which means you get paid to complete your holiday shopping. Talk about a win/win scenario!
5. Reconsider Retailer-Specific Cards
Like you, retailers are also looking to take advantage of the holiday season. During these times, retailers offer discounts for customers who open a credit card at check out. Because the savings are nice, many people don’t think twice about applying for a card at their favorite store.
However, applying for any type of credit can negatively impact your score as it:
- Triggers a hard inquiry
- May drop your score a few points
- Lowers your average age of credit
- May hurt credit utilization
Before applying for a retailer-specific credit card, make sure that it’s worth it.
Don’t let holiday shopping put your credit on the naughty list. There’s nothing worse than beginning a new year with a heavy debt load. Keep these tips and tricks in mind so that you can go into the new year with a healthy credit score. To learn how our financial services can help you, contact Satty, Levine & Ciacco, CPAs, P.C. to get started.