Credit cards can make holiday shopping a breeze. But think again before you start swiping. If you don’t plan properly, those easy breezy shopping trips can turn into a storm of financial headaches.
A recent study shows that more consumers are spending more and budgeting less during the holiday season. Almost half are using credit cards and of those, almost a third are not paying off the balances in full right away. Unfortunately, many of those shoppers are spending the holiday season digging themselves deeper into debt and will be singing the blues come January.
Don’t wait until it is too late – now is the time to be pro-active in your planning so that you will be prepared financially.
Ways to Protect your Credit:
- Don’t fall for credit card deals It may be tempting to apply for a new store card during the holidays with special offers and discounts. However, be aware that your credit score may take a dip as a result. Some store cards have a lower limit ($1,000), so it is easier to max them out, which can lower your credit score. You also do not want to apply for a lot of cards at once. Each inquiry can drop your credit score by 10-30 points. In addition, while they seem more convenient, it is generally a good idea to stay away from department store credit cards. They tend to have higher interest rates and larger yearly fees.
- Pay your bills on time Pay down your balances and keep them down, or pay cash for your purchases. Late payments will not only reflect poorly on your credit score, they’re also likely to hike up your interest rate.
- Check your credit report It is a good practice to get a copy of your credit report every 6 months, and review it for accuracy.
- Set a budget and stick to it. If you don’t know where to begin, there are apps and software that can help you stay within your budget. Planning ahead can prevent you from falling into the retail pitfalls.
- Be smart about your holiday shopping. Always keep in mind that a low credit score adds up to higher interest rates. So, in the long run, the savings you get by opening multiple cards is probably not worth the higher rate you will pay on future loans.
If you have questions regarding your credit report, contact your lending professionals at Eastex Credit Union. As always, we are here to help.