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5 Credit Traps to Avoid During the Holidays
Posted on 2015-12-02 08:00:33
Everybody loves a bargain, and there’s no shortage of them to entice holiday shoppers. But many people will have the holiday blues in 2016 when the bills start coming in. Here are 5 traps to avoid that will help keep your credit score in check as we head into a new year.
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1. Tendency to Overspend
Study after study shows that consumers spend more when paying with a credit card instead of paying with cash or a debit card. Plastic is oh so convenient, and it’s harder to keep track of what you’ve spent. Set a budget ahead of time and pay with cash to ensure you stick to your budget. Come January, you’ll be glad you did.
2. Maxing Out Credit Card Accounts
OK, you’ve decided to ignore the first trap and use credit cards so you can earn rewards. Just know that your credit score will factor into consideration the percentage of your credit card limits that are in use. Try to keep the balances below 30%. If you exceed that, pay down the balance before your statement closing date so that a lower balance gets reported to the credit bureaus and on your credit report.
3. Identity Theft
Store clerks won’t be the only ones working hard during the holiday season. Identity thieves will be putting in overtime. Be aware of your surroundings. Don’t sacrifice convenience for security. Identity theft can wreak havoc on your credit score while you work to untangle the damage.
4. Opening New Credit Card Accounts
Retailers love to entice shoppers to open with a 10% to 20% discount on your purchases just for opening a store credit card account. Keep in mind that retail credit cards usually have a high interest rate. If you don’t pay the balance in full, any savings will be eaten up—and then some—with interest. Also, your credit score could take a hit when prospective creditors check your credit report. If you weren’t planning to open a new account, don’t be lured in with a special offer during the holidays
5. Emotional Spending
Let’s face it. For many of us emotions play a big role in holiday shopping. Don’t let emotions rule the day. Stay focused on January. What is your situation going to look like then? Will you be struggling to pay the rent because you overspent? Will you be able to pay your accounts in full? Don’t sacrifice a good credit score to emotions.