The holiday season is a time of giving, joy, and celebration, but it can also become a time of financial stress if you’re not mindful. With countless sales, holiday promotions, and the pressure to buy gifts for loved ones, it’s easy to get swept up in the excitement and overspend.
Relying too much on credit cards during this time can quickly lead to overwhelming debt that carries into the new year. However, by using credit cards responsibly, you can enjoy the festivities without sacrificing your financial well-being.
Here are some essential tips for using your credit cards wisely this holiday season.
5 Do’s of Using Credit Cards for the Holidays
1. Set a Holiday Budget
Before diving into your holiday shopping, it’s crucial to create a clear, realistic budget. This budget should cover all aspects of your holiday spending—not just gifts. Remember to account for additional expenses like holiday meals, decorations, travel, charitable donations, and social events.
Once you’ve established your total budget, break it down into categories and allocate specific amounts to each. This ensures you have a roadmap for your spending and helps prevent impulse buys.
2. Pay Off the Balance in Full
One of the most important habits you can adopt during the holidays is paying off your credit card balance in full by the due date. While it may seem convenient to make minimum payments and push the balance into the next month, doing so often leads to accumulating interest. Credit cards typically carry high interest rates, and the longer you carry a balance, the more your holiday spending will cost in the long run.
To avoid this, make it a priority to only charge what you know you can pay off when the statement arrives. If possible, try to save up some extra money before the holiday season begins. This cushion will make it easier to clear your credit card bill right away.
3. Take Advantage of Reward Programs
Many credit cards offer perks like cash back, points, or travel rewards that can be especially valuable during the holiday shopping season. By strategically using a rewards card, you can benefit from your purchases while sticking to your budget. For example, a cashback card could help you earn money back on your spending, effectively reducing the cost of your holiday purchases.
If you’re planning to spend more than usual over the holidays, check if your card has bonus categories, such as extra cashback on groceries, dining, or department store purchases. Just be cautious—while rewards are great, don’t let them tempt you into spending more than you can afford.
4. Keep Track of Your Purchases
During the holiday season, it’s easy to lose track of how much you’re spending, especially when you’re using credit cards. With online shopping, special promotions, and holiday sales happening all at once, you might find yourself swiping or clicking more often than you realize. Tracking your purchases is essential to avoid going over your budget and accumulating unmanageable debt.
One effective way to do this is by regularly checking your credit card statements, either online or via mobile banking apps. Many credit card companies allow you to view real-time updates on your spending, so you can see how quickly your holiday purchases are adding up.
5. Use Credit Card Alerts
Most credit cards offer the option to set up spending alerts, which can be a valuable tool for keeping your holiday spending in check. These alerts can notify you when you make a large purchase, when you’re approaching your credit limit, or when you hit a specific spending threshold.
Additionally, credit card alerts can serve as a security measure, protecting you from fraud or unauthorized transactions. If you receive an alert about a purchase you didn’t make, you can immediately report it to your credit card issuer and prevent further fraudulent activity. This is particularly useful during the busy holiday season, when online shopping and crowded stores can make you more vulnerable to theft.
5 Don’ts of Using Credit Cards for the Holidays
1. Don’t Use Credit Cards for Impulse Purchases
The holiday season is notorious for tempting shoppers with sales, limited-time offers, and flashy marketing designed to encourage impulse buys. Unplanned purchases can quickly add up, and using credit cards for these impulse buys can lead to unnecessary debt.
To avoid this, make a detailed shopping list before you hit the stores or go online. This list should reflect your holiday budget and include only the items you truly need to buy. Sticking to the list helps you avoid impulse purchases, which can derail your financial plans.
2. Don’t Max Out Your Credit Limit
Maxing out your credit cards during the holiday season can cause significant financial harm, both in the short and long term. Not only can it lead to overwhelming debt, but it can also negatively affect your credit score.
One key factor in your credit score is your credit utilization ratio, which is the percentage of your available credit that you’re using. If your credit utilization is high—meaning you’ve used a large portion of your credit limit—it can lower your credit score, even if you’re making payments on time.
3. Don’t Open Multiple Store Credit Cards
During the holidays, retailers often push store-branded credit cards by offering tempting discounts at checkout—sometimes as much as 20% off your purchase. While the immediate savings may sound appealing, opening multiple store credit cards in a short period can hurt your financial health in several ways.
Firstly, each time you apply for a new credit card, a hard inquiry is made on your credit report, which can lower your credit score temporarily. Multiple hard inquiries in a short time frame can signal to lenders that you may be a high-risk borrower, especially if you’re opening store cards without fully considering their impact.
Secondly, store credit cards often come with higher interest rates than regular credit cards, meaning any balance you carry on those cards will accrue more interest. If you don’t pay off the balance quickly, that initial discount can end up costing you more in the long run.
4. Don’t Forget About Post-Holiday Expenses
It’s easy to get caught up in the holiday spirit and overspend, but it’s crucial to remember that life goes on after the holidays. Bills, rent or mortgage payments, utility costs, and other routine expenses will still need to be paid once the festive season is over. If you overspend on your credit cards during the holidays, you may find yourself short on cash when it comes time to pay for those essential post-holiday expenses.
To avoid this situation, set aside a portion of your holiday budget for January bills or unexpected costs. Having a financial cushion in place ensures that you won’t rely on credit cards to cover basic expenses after the holidays.
5. Don’t Fall for Deferred-Interest Promotions
Many retailers offer “buy now, pay later” or deferred interest promotions during the holidays. These deals often promise 0% interest for a set period, giving the impression that you can spread out your payments without incurring extra costs. While these offers may seem appealing, they often come with strict conditions and can lead to unexpected charges if not managed carefully.
These interest rates eventually can be very high, often ranging from 20% to 30%, which can turn a great holiday deal into a costly mistake. Instead of relying on these financing deals, it’s often better to stick to a regular credit card with rewards or a lower interest rate.
Protect Your Money With AZCCU’s Help
Credit cards can be a helpful tool during the holiday season, but they need to be used wisely. By setting a budget, tracking your purchases, and avoiding impulsive spending, you can enjoy the holiday season without ringing in the new year with debt. Stay mindful, plan ahead, and you’ll keep both your holiday spirit and financial well-being intact.
Arizona Central Credit Union can get you a credit card with a low interest rate, designed not only to save you money but to carry balances responsibly. If you have any questions, contact us online or call (866) 264-6421.
