While many people look to the holidays as a time of lights, cozy fires, and quality time with friends and family, not everyone is excited about the cost. Though a time for giving, it’s also a time of year when anxiety is high as the shopping season ensues.
According to a LendingTree 2021 report, nearly 48% of people surveyed said they were dreading the holidays due to the costs associated with them, while 24% were so anxious about it they were losing sleep.
To help you avoid losing sleep as we head into this busy season, we’ve compiled four credit card mistakes to be aware of so that you can keep your wallet and level of debt balanced and intact.
1. Don’t overuse your credit cards.
Up to 30% of your credit score rating is dependent on your credit utilization ratio. If you’re using more than 30% of your available credit, your score can be negatively impacted. This includes spending more than you can afford. While you should always strive to pay off your balance each month, repaying a large amount before your credit lenders make their monthly report to the credit bureaus can help keep your utilization ratio in good standing.
2. Avoid opening a store credit card unless you spend a lot at that specific retailer.
Saving 10%–20% off your purchase may seem smart but opening a store card will instantly open an inquiry on your credit. Inquiries can stay on your credit score for up to two years, and too many can negatively impact your score. In addition, store credit cards chronically have high interest rates. However, if you’re a responsible card owner and spend a lot at a specific retailer, there are exclusive discounts you can potentially benefit from during the shopping season. Just weigh the pros and cons before signing up.
3. Fail to leverage credit card rewards.
While you should refrain from making purchases just to get reward points, identify the rewards and cashback bonuses that can help you make your holiday gift selections. For example, if you have a card that rewards you for dining out, use that card to purchase gift cards at restaurants.
4. Take a cash advance.
Credit card lenders will often offer cash advances, but you’ll pay 3%–5% on the overall advance—in addition to high APRs of 25% or more. If you need cash in hand, experts recommend keeping a balance on your card since your interest rate will be lower, asking to defer payment, or looking into a personal loan.
While avoiding these mistakes can help keep you from going into debt this holiday season, if you’re feeling overwhelmed financially it’s always a good idea to talk to a credit counselor. A credit counselor can help you create a manageable budget and may even advise you to enroll in a debt management program, which is designed to lower your interest rate and consolidate your loans into affordable monthly payments.