Credit Card Tips for the Holidays

According to one survey, Americans carried over $1,380 in holiday debt in 2020. It might not sound like much, but it’s a dollar figure that can haunt budgets for months or years if you’re not using credit responsibly. For example, $1,380 on a credit card with 17% interest can take you more than 5 years to pay off if you make only minimum payments—and you’ll pay over $2,000 just in interest.

But long-standing debt isn’t the only risk involved in using credit for the holidays. Running up credit card balances can hurt your credit. And if you’re not careful, using cards during the holiday rush can put your information at risk and leave you open to holiday identity theft. Get nine holiday spending credit card tips for beginners and experienced cardholders alike below.

9 Credit Card Tips for Beginners

• Check your credit
• Ask for a credit limit increase
• Apply for a credit card with a 0% APR introductory offer
• Pay down debt before—and after—the holidays
• Create a holiday spending budget
• Use credit card rewards
• Guard your financial information and identity
• Only use credit cards for what you could spend in cash
• Create a plan for paying off cards ahead of time

1. Check your credit 

Begin by checking your credit scores and reports. They help you understand how you’ve been using your credit and what might be affecting your scores—and what to avoid doing this holiday season to negatively affect your credit scores. They also tell you where you stand if you want to apply for additional credit for the holiday season.

Another reason to check your credit now is that doing so will give you a baseline of where you are so you know if your score goes up or down later. That helps you stay on guard against identity theft. A sudden change in your credit score can be a sign someone is applying for and using accounts in your name. 

2. Ask for a credit limit increase

If you have existing credit cards and you’re a cardholder in good standing, the months prior to the holidays can be a good time to ask for a credit limit increase. Keep in mind that you’re not asking so you can spend more—you’re asking for a higher limit so you can spend what you already planned to without hurting your credit utilization.

Credit utilization is the second-most important factor in determining your credit score. It’s the ratio between your credit limit and how much of that credit you’ve used, and you want to keep it as low as possible.

If you have a card with a limit of $1,000 and you spend $300, that’s a utilization rate of 30%. But if you get approved for a credit limit of $2,000 and you spend $300, that’s a utilization rate of only 15%, which is better for your score.

3. Apply for a credit card with a 0% APR introductory offer

Those with good or excellent credit might want to consider applying for a card with a low APR introductory offer.

This can be a way to finance your holiday without paying a ton of interest for doing so. However, it’s still important to maintain your budget and not overspend just because you won’t be paying the balance off until later. Otherwise, you make this season’s holiday festivities next season’s financial problem.

4. Pay down debt before the holidays

Speaking of last season’s debt—if you can pay it down before you start spending this season, that’s a great accomplishment. It also frees up your credit and your budget so you can better enjoy the current holiday season. 

5. Create a holiday spending budget

Whether you’re using cash, credit, or a mix of both, enter the 2021 holiday shopping season with a plan. Take an honest look at your personal budget. If you don’t have a holiday budget, create one before you move forward. Decide how much you can realistically spend, including using credit, for the holidays.

Consider which gifts you want to buy and which events you want to host or attend. You might not be able to do everything, and that’s okay. Be honest with yourself, your family, and your friends about what you can afford to do with your time and money this year.

Then make a list and assign each item a monetary budget. Once you assign a dollar amount to a category, stick to it no matter how you’re paying for your holiday expenses.

6. Align budgeted spending with credit card rewards

If you’re using credit cards for the holidays, check your accounts to see if any offer cash back or rewards points. If they do, double-check which categories or stores you can shop in to earn the most points with each card.

For example, some travel rewards cards offer more points when you shop at supermarkets. You could use such a card to cover the costs of a holiday meal while getting cash back perks that lower the cost of holiday spending. You might also be able to maximize rewards when purchasing gift cards.

7. Guard your financial information and identity

As you enjoy holiday shopping, be on guard. With so much spending going on during the season, hackers and thieves often target holiday shoppers for identity theft schemes. 

Don’t use debit card PIN unless you have to, and shield the keypad when you enter your information. Keep a close eye on your wallet or purse, and check your credit card statements regularly to ensure all charges are yours. You can also use ExtraCredit’s Guard It feature to help keep your identity and account information safe during and beyond the season.

8. Only use credit cards for what you could spend in cash

Don’t break out the holiday credit card use to cover expenses you can’t actually afford. This can be a temptation all the time, because credit cards provide the option to enjoy now and pay later. But it’s especially tempting to splurge during the holidays because you want to show others you care with gifts and events.

No one you love, however, would want you to go into debt to demonstrate these things to them. Instead, concentrate on quality over quantity and find ways to celebrate within your budget. Ask yourself each time you engage in holiday shopping with credit cards whether you’d buy these items if you were paying cash. The answer can help you keep holiday spending in check.

9. Create a plan for paying off cards ahead of time

When you do use credit for the holidays, ensure you have a realistic plan for paying off the debt sooner rather than later. The longer you hold credit card debt, the more expensive it becomes. Your holiday budget of $1,200 could easily cost you $1,600 or more if you take a long time paying it off.

Here are some ideas for paying off holiday credit card debt:

• Use an end-of-year or holiday bonus. If you know for sure a bonus or payout is coming your way, you might shop now with the intent of covering the costs when you receive that pay.
• Use your tax refund. The same is true for a tax refund. Ensure you file your taxes as early as possible so you can get the refund and pay off your holiday debts before interest expenses drive up the costs.
• Use a balance transfer card. If you can get approved for a balance transfer card with a 0% introductory APR, you can move your holiday debt to the new card. That typically gives you 12 or more months to pay the debt off without accruing interest costs. 

Prepare Now for the Holidays

Ultimately, the secret to using credit for holiday shopping comes down to responsibility. Set a realistic budget, have a plan to pay off your debt as soon as possible, and pay attention to your credit reports so you know if your information has been compromised.

Don’t know where to start? Sign up for ExtraCredit to get a look at all your credit reports and 28 of your FICO® scores. You’ll also get options for credit cards, credit monitoring, and other services— and signing up through ExtraCredit can earn you cash back rewards!

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