Avoid These Common Mistakes Credit Card Users Make During The Holidays
How much do you plan on spending this holiday season? If this year was particularly financially difficult, it might not be as much as before.
But according to the National Retail Federation’s Holiday and Seasonal Trends report, the average consumer will spend about $967.13 on their holiday shopping this year. Although some will use cash, payment processing company Vantiv says 50% of Americans will use a credit card.
Although credit cards help cover seasonal costs, they can also leave you with a pile of debt at the start of the new year. If you understand common mistakes cardholders make, you can avoid them yourself and make your holidays a little less stressful.
Understand Your Rewards
Rewards credit cards are one of the best ways to save big on your seasonal shopping. For example, if your card rewards you for shopping at places you already frequent, you can redeem them for statement credits — which are basically the same as discounts.
Or, if you earn points for certain purchases, you could exchange them for gift cards or other products at eligible retailers. You can then use these gift cards to save on your gift list and other holiday shopping.
Alternatively, you can get more bang for your buck by redeeming your rewards through your card provider’s shopping portal. Here, you can shop for things you already need while earning bonus rewards like cash back and generous discounts.
Be Wary Of Store Cards
The holiday season is a big opportunity for retailers to promote their store credit card. They might offer deep discounts on your first transaction or another tempting benefit to encourage you to sign up.
However, you should be cautious when it comes to store cards. Although they might help you save at first, store cards don’t offer as many benefits as regular rewards credit cards — especially if you rarely shop at that retailer.
Store cards are also more expensive. Most have a significantly higher APR than traditional credit cards, which can offset any savings you initially earned.
Lastly, signing up for store credit cards during the holidays can hurt your credit. Most perform a hard credit check when you apply, which temporarily knocks points off your score. Additionally, it doesn’t look good when lenders see a series of credit card applications in a short time.
Create A Budget
Just because you have a credit card doesn’t mean you can blindly swipe as you shop. You should make a budget to track your credit card spending, just as you would with a debit card or cash.
First, write a list of people you intend to give gifts and an amount you feel comfortable spending. After that, assess your income and expenses. How much can you spend while still having the ability to cover your monthly statement?
Whatever the amount, make sure it aligns with your budget. It’s okay if you have to hold back on gifts this year — chances are, everyone you know will, too.
Don’t Max Out Your Card
Several factors make up your credit score, and your credit utilization is a big one. It reflects how much you have borrowed out of the total available to you. If you rack up a steep balance, it can impact your credit utilization ratio and, consequently, your credit score.
You can avoid this problem by picking a single card for your holiday purchases. Whether it’s the one with the best rewards or the lowest APR, track your spending to make sure you stick to your budget. If you have trouble remembering these things, text alerts or emails can let you know when you reach a certain spending level.
Watch For Credit Card Fraud
According to a 2017 consumer survey from Generali Global Assistance, 75% of Americans were worried about data breaches during the holidays. That figure will likely be the same, if not more, this year, too.
The holidays are one of the busiest times of the year not only for shoppers but for thieves as well. If you intend to use your credit card for holiday shopping, make sure you take the proper precautions to protect yourself, such as:
- “Dipping” the EMV security chip when you pay instead of swiping since the stripe lacks fewer security protections
- Connecting your credit card to Apple Pay, Google Wallet, or another mobile payment app
- Only shop on secure websites with an SSL security certificate
- Don’t make purchases online when using public WiFi
- Make sure third-party sellers from Amazon, eBay, and other ecommerce platforms are legitimate
- Opt for notifications that alert you when new transactions are made and review your statements for unauthorized purchases
Consider using a credit monitoring service, especially if you have more than one credit card. Some card companies offer this service for free, so check with your issuer to see if you can take advantage of this important benefit.
- Lake, Rebecca. “Brushing up on Holiday Credit Card Basics to Avoid Spending Pitfalls.” The Balance, 25 June 2019, www.thebalance.com/holiday-credit-card-dos-and-donts-4154570.