Did you know the National Retail Federation estimates that Americans will spend $730.7 billion in holiday retail purchases this year? From buying gifts to paying for flights and holiday meals, these expenses can leave you reaching for your credit card. But while using credit can help you get what you need this holiday season, it comes with the potential to leave you with a high load of debt and interest that hurt you in the long run. Luckily, you can follow these eight credit tips to prevent overspending, pay back debt effectively and even save money.
1. Have a Holiday Budget Set
To avoid overspending when using your credit cards, you need to first have a budget for your holiday expenses. This budget should include not only expenses for holiday travel and meals but specific amounts for each person who needs a gift. You may find it helpful to allocate planned expenses to categories and even begin making a shopping list. Knowing what you can afford for your holiday expenses will make it easier to make decisions about purchases and track credit card charges as you go along.
Read More: How to Budget and Save Money
2. Take Advantage of Card Benefits
There's a good chance that you have a credit card that offers some rewards that can get you perks and save you money this holiday season. Your card might give you a percentage of cash back or rewards points, either for all purchases or for specific categories. You can often apply these rewards toward your card balance or redeem them for flights, hotel stays, gift cards and other merchandise. A Holiday Inn credit card, for example, might even give you a free night's hotel stay as a loyalty reward.
3. Use Store Credit Cards Carefully
When you're out shopping, stores will often entice you with some appealing discounts if you get and use a store credit card. While a store card can help cut holiday gift expenses, it can also make it easy to overspend since getting a nice discount on that first purchase can make your emotions run high. Also, the interest on such cards often run higher than other credit cards. To use a store card smartly, stick to only purchases on your holiday budget and don't buy extras just because you get a discount.
4. Track Charges to Avoid Overspending
Unlike when using cash, you don't physically see the impact of your spending when you use a credit card. This makes it easy to overspend if you don't track your charges and compare them to your holiday budget. So, to avoid ending up with a pile of credit card debt, use your credit card's online portal to track charges in real time, set up alerts and mark purchases off your budget as you make them. Using spending tracker apps like Mint and Wally can make tracking purchases across multiple cards less tedious.
5. Pay Off Holiday Debt Quickly
Using credit wisely also involves paying off that holiday debt so that you can minimize interest charges and avoid damage to your credit score. If possible, use any holiday savings, holiday bonuses or income tax refund to pay off the full balance as soon as you can. If you're tight on cash, make at least the minimum payment to avoid any late fees or interest hikes – and pay some extra whenever you can. To plan ahead for the next holiday season, consider starting to save up in the new year so that you can rely less on credit.
6. Look Out for Seasonal Promotions
You can often find holiday credit card promotions that help you get more rewards, receive discounts at certain stores and pay less in charges. For example, American Express regularly offers card-specific promotions that can save you money on hotel stays, gift cards, tickets to local events, restaurants and holiday gifts at your favorite stores. Other credit cards might give you extra points or cash back during the holiday season, allow you match prices or charge a lower promotional interest rate.
7. Apply for New Cards With Caution
Credit card companies often offer perks like interest-free periods and sign-up bonuses if you open up a new account. While applying for a new card can help you finance your holiday purchases more easily and even save money, beware of the risks before you decide a new credit card is a good idea. If you don't pay off your purchases within the promotional period, you can be hit with high interest charges. The sign-up bonuses also often require spending a certain amount within a period of time, and this can encourage overspending.
8. Time Your Purchases Wisely
If you do your holiday shopping mainly on a few days like Black Friday and Cyber Monday, you might save money. But you might also have a harder time paying off the whole sum in a short period of time before interest charges add up. Unless you have the money in savings or have a credit card with a zero-interest promotion, try to spread out your purchases over a longer period of time, such as over a couple months. This way, you can still get the deals but not get shocked with a large bill at once that you need to pay off.
As you've seen, using a credit card for your holiday purchases doesn't have to be a bad thing. When used wisely, credit cards can offer convenience and even help you save over using cash. So, go make that holiday budget and put these tips into practice as you start your holiday shopping!
- CreditCards.com: 2017 Credit Card Special Holiday Promotions
- Experian: 10 Tips to Help You Recover from Holiday Debt
- IHG: IHG® Rewards Club Credit Card Offers
- American Express: Offers
- Discover Rewards Program Review, Tips & More
- Credit Karma: 6 Things to Watch out for With Store Credit Cards
- Fiscal Tiger: How to Track Credit Card Purchases
- Forbes: 12 Free Apps to Track Your Spending and How to Pick the Best One for You
- The Ascent: Best Credit Card Sign-Up Bonuses
- CardRates.com: 6 Credit Strategies to Help You Financially Prepare for the Holidays
- National Retail Federation: NRF Forecasts Holiday Sales Will Grow Between 3.8 and 4.2 Percent
- CNBC: 3 Expensive Mistakes People Frequently Make With Their Store Credit Cards
- National Retail Federation. "Holiday Shoppers Plan to Spend 4 Percent More This Year." Accessed March 26, 2020.
- Gallup. "Americans Plan to Spend Generously This Christmas." Accessed March 26, 2020.
- Deloitte. "Deloitte: Holiday Retail Sales Expected to Jump Between 4.5–5%." Accessed March 26, 2020.
- American Research Group Inc. "2019 Christmas Gift Spending Plans Down Slightly from 2018." Accessed March 26, 2020.
- National Retail Federation. "2018 Holiday Sales Grew 2.9 Percent amid Turmoil over Trade Policy and Delay in Data Collection." Accessed March 26, 2020.
- U.S. Census Bureau. "45112: Hobby, Toy, and Game Stores: U.S. Total — Not Seasonally Adjusted Sales - Monthly [Millions of Dollars], November and December 2018 Sales." Accessed March 26, 2020.
- U.S. Census Bureau. "44831: Jewelry Stores: U.S. Total — Not Seasonally Adjusted Sales - Monthly [Millions of Dollars], November and December 2018 Sales." Accessed March 26, 2020.
Ashley Donohoe has written about business and technology topics since 2010. Having a Master of Business Administration degree, bookkeeping certification and experience running a small business and doing tax returns, she is knowledgeable about the tax issues individuals and businesses face. Other places featuring her business writing include Zacks, JobHero, LoveToKnow, Bizfluent, Chron and Study.com.