While you might have plans to behave yourself financially this holiday season, you might get caught up in the spirit of giving and spend more than you intend, possibly using your credit card to bring smiles to the faces of those closest to you. It’s great to be feeling so generous, but not at the expense of your financial house. Before you spend a dime this holiday season, brush up on any changes that might have occurred with the Fair Credit Reporting Act, and get a copy of your credit report so you know where you and your credit currently stand.
Don’t Apply for a Credit Card You Don’t Need
Stores know customers are caught up in the spirit of giving, which means they might try to push any credit card they have on you more than normal. While it might be tempting to apply to buy a few more gifts or supplies, it’s in your best interest to spend within your means, even if it means passing up on an extra 15 percent off. The reason for this is that every time you apply for a credit card, your score takes a small ding.
Keep an Eye on Your Statements
The holidays make for a prime opportunity for cyber thieves and hackers. Be extra vigilant whenever you pull out your card. Make sure any ATMs you use haven’t been tampered with, that you go to extra lengths to hide your PIN while at the register and that any sites you use for holiday shopping are secure. Ensure you keep a close eye on your bank and credit card statements for the next several months after the holidays to make sure your financial information hasn’t been stolen and used to make fraudulent charges. Bear in mind that fraudulent charges on a credit card are often easier to take care of than those made on a debit card, which means it could be a good idea to do your holiday shopping with your credit card and immediately pay off the balance before the end of the month.
Create a Budget and Stick to It
Warren Buffett once said, “Most behavior is habitual, and they say that the chains of habit are too light to be felt until they are too heavy to be broken.” Take this lesson to heart and make it a habit to not only make a holiday spending budget, but do everything you can to stick to that budget. Before spending money on gifts, dinners or anything else, write down everything you’ll know you’ll need as well as anything you think you’ll need, making sure you differentiate between the two.
Do some research to get a solid idea of how much you can expect to spend on everything and everyone to develop a budget. Once you’re done with that, decide how you’ll come up with that money while ensuring all your other bills and everyday financial obligations are taken care of first. If you know you’ll likely be tempted to spend outside of your budget, then allow yourself a small amount of mad money. If you don’t spend that money, you can throw it in a savings account as a gift to yourself.
Use Your Credit Cards Wisely
For those times when you do use your credit card, do so wisely. Bank of America’s executive Jason Gaughan says, “By using a rewards card, shoppers can earn points they can redeem after the holidays to help pay their bills.” This means seeing if there are any cashback offers or any other useful financial rewards you can put to good use. Before getting too excited about any offers you see, make sure you read the fine print and fully understand what you’re agreeing to. In any case, set a reminder for yourself to pay off your new credit card balance ASAP so your cashback or reward doesn’t become worthless because you have to pay interest on your holiday purchases.
Keep an Eye on Your Total Credit Usage
A large portion of your credit score is made up of how much of your total credit you’re using. For instance, if all your credit cards combined have a limit of $10,000 and you have $8,000 in credit card debt, you’re using 80 percent of your total available credit. It’s best to keep that percentage as low as possible, preferably no more than 30 percent.
Even if you don’t plan on applying for another credit card or loan anytime soon, the fact remains that using so much of your available credit isn’t doing your score any favors. This is why it’s a good idea to look over your credit score and reports before setting sail this holiday season, so you know what type of financial weather you can expect on the journey ahead and how you should navigate yourself. TransUnion’s vice president Heather Battison reminds us that, “Holiday shoppers should be mindful of racking up too many credit card charges in order to keep their credit utilization in a healthy range.”
You Don’t Have to Spend Money to Give a Great Gift
If you’re a bit pressed for cash this season, or if you just don’t want to spend money because you’re saving it up, know that you don’t always have to spend money on those closest to you. For instance, rather than buying your mother a gift, you can instead keep the driveway, walkway and other paths shoveled this holiday season, or maybe you can spend a bit more time with her if you don’t already. If any of your family or friends have pets or kids, you can baby or pet sit for them sometime in the future. Think of what your family and friends need most, something that’s not easily given with a standard holiday gift. Not only is this sure to make them feel good, it is sure to make you feel good as well all without having to go broke.
Avoid giving yourself the “gift” of accidental debt this holiday season. Remember, it’s supposed to be the most wonderful time of the year, not the worst time for your credit score and the rest of your personal finances.