No one wants to start the holiday season in debt. Yet, 37% of cardholders have maxed out a credit card or come close since 2020, partially due to the pandemic-induced high inflation rates.
With that in mind, here are five ways to avoid making credit card mistakes before the holiday season.
1. Not Paying More Than the Minimum Payment
With credit card interest rates currently at 24.72%, you’ll need to pay more than the minimum to make much of a dent in your credit card debt. The more debt you have, the worse your credit utilization ratio (the percentage of your available credit) will be. When you have more debt than credit, it hurts your credit score.
2. Depending on Credit Card Rates Going Down
Despite the Federal Reserve cutting the target interest rate in September, don’t rely on your credit card interest rate to drop significantly. While credit card interest rates will go down minimally, it won’t have much impact. This means you should continue paying on your credit cards as usual—and pay more if possible.
3. Carrying Interest Month-to-Month
While carrying credit card debt each month is less than ideal, the current high interest rates make it critical to pay down. Compounding interest on top of debt makes it increasingly more challenging to manage. Some alternatives include transferring your balance to a card with a 0% introductory rate or simply asking your borrower for a rate reduction.
4. Go Into Debt Buying Gifts
While getting the perfect gift for all your family and friends may be your holiday goal, don’t rack up debt to do so. Plan a holiday budget to emerge from the season and into the new year with a stable financial outlook.
5. Not Get Help
If you’re in debt and find it hard to get out of it, help is available. Make an appointment with a counselor through a credit counseling organization. They can help you create a budget, map out goals, and determine the best next step. This may be a debt management plan, which allows your counselor to work with your lenders to consolidate your credit cards into one affordable monthly payment at a reduced interest rate.
Bottom Line
The holidays are supposed to be a time of joy and togetherness, so following these tips can help ensure you’re not too busy worrying about your finances to enjoy the moments.