Do’s and Don’ts of Using a Credit Card at the Holidays

‘Tis the season for traveling to Grandma’s house, giving gifts and hosting parties. Credit cards can help you pay for these extra holiday-related expenses, but if you’re not careful, you could start the new year saddled with debt.

This is a risk for Americans who depend on credit cards for holiday spending. About half of U.S. consumers expect to spend at least $500 on holiday expenses in 2019, according to U.S. News research. And about a third of consumers plan to use credit cards as a primary method of payment.

In an ideal world, you’d set aside money each month all year long to prepare for the hundreds of dollars you may spend at the holidays.

“Doing your holiday shopping on a credit card and not paying it off right away can put you on the fast-track to debt spiraling out of control,” says Leslie Tayne, a financial attorney and founder of Tayne Law Group.

If you’ll use a credit card this holiday season, these do’s and don’ts can help you avoid racking up debt and make the most of your card benefits:

— Do set a budget.

— Do use credit card rewards for holiday expenses.

— Do watch out for fraudulent transactions.

— Don’t use your credit limit as a spending guideline.

— Don’t chase discounts with store credit cards.

— Don’t ignore your card statements after the holiday season.

Here’s more about using your credit cards wisely during the holiday season.

[Read: Best Rewards Credit Cards.]

Do Set a Budget

Getting caught up in the excitement of the season and overspending can be easy to do. But you’ll have to pony up at some point, and a high credit card balance can result in paying interest for months or even years to come.

Sticking to a budget can help you keep your expenses in check. “It’s important to make a budget and a plan for holiday shopping so there are no surprises when the bills come in January,” says Rod Griffin, director of public education at Experian, one of the three major credit bureaus.

If possible, charge only what you can afford to pay off on your next billing statement. If you can’t, set a limit and plan how you will pay off your charges.

Take some time with this process. Using a spreadsheet or a pen and paper, list all of your holiday expenses and decide how much you can spend without going overboard. You may need to get a little creative with certain aspects of celebrating, but your future self will thank you.

Do Use Credit Card Rewards for Holiday Expenses

Credit card rewards programs differ, and some offer bonus rewards for expenses that can increase at year-end, such as travel and groceries.

Cards such as Chase Freedom and Discover it Cash Back earn bonus rewards on categories that rotate every quarter. These types of cards often feature bonus spending categories linked to the holiday season.

“Use this to your advantage in helping to pay down your balances, especially if you have cash back rewards that you can apply directly to your account,” Tayne says.

You may also consider opening a new credit card to use a welcome offer. Some credit cards offer hundreds of dollars in cash back, miles or points you can apply toward gift cards or statement credits to pay holiday bills.

Do Watch Out For Fraudulent Transactions

Not only consumer spending but also credit card fraud jumps during the holiday season. Keep a close eye on your credit card statements to track how much you’re spending and to watch for unauthorized charges.

A 2019 report from payment systems company ACI Worldwide revealed a 13% increase in fraudsters buying items online with stolen credit card information and picking up their purchases in the store.

“The holidays can be a risky time when it comes to identity theft and credit fraud,” Griffin says. “Hackers are aware that consumers spend significantly more during the holiday season.”

Your credit card company has fraud monitoring tools, but these might not alert you to every instance of fraud. If you do not recognize a charge, check your receipts to confirm that it is not yours, and then contact your credit card company to report it as fraudulent.

Use your credit card issuer’s tools, Tayne says, that let you receive an alert for every card transaction. That way, you’ll know whether someone else has used your card.

[Read: Best Balance Transfer Credit Cards.]

Don’t Use Your Credit Limit as a Spending Guideline

You may be tempted to max out your credit card. But this can be a problem for a couple of reasons.

First, your credit limit doesn’t represent how much you can afford to pay off. Second, a maxed-out credit card can have quite a negative effect on your credit score.

How much you owe is the second most influential factor in your FICO credit score. Your credit utilization rate — the amount you owe divided by your total credit limit, expressed as a percent — is also a key component.

“Ideally, you should pay your credit card balances in full each month, but you should never let balances exceed 30% of your credit limit,” Griffin says. “Scores tend to drop much more quickly when you cross that threshold.”

Even if you have fairly low credit limits, stick to a budget and try to avoid carrying high balances.

Don’t Chase Discounts Using Store Credit Cards

We’ve all gotten the pitch: If you apply for the store’s credit card at the register, you save on today’s purchase. Taking the bait can be tempting, but it can also cause trouble.

For starters, store credit cards tend to charge higher interest rates than traditional credit cards. Also, many store cards offer ongoing discounts to entice you to keep spending, which can lead to overspending.

Finally, having one inquiry on your credit report from when you apply for a card won’t do much to your credit score. But multiple credit inquiries in a short span can have a compounding effect and knock off more than a few points from your score.

Avoid opening a card if you think it might cause more problems later. The same goes if you have debt on other credit cards. If that’s the case, adding a new card to the mix could complicate your efforts to pay off what you owe.

[Read: Best Cash Back Credit Cards.]

Don’t Ignore Your Card Statements After the Holiday Season

Especially if you overspend during the holidays, you may not want to assess the damage. If you ignore the bill, though, paying off your debt could take longer.

“Credit can be a financial tool, but debt is a financial problem,” Griffin says. “Having a plan to pay down your debts after the holidays is key to avoiding financial stress.”

In some cases, a balance transfer to a new credit card could pay off. A card with a 0% APR period on balance transfers allows you to pay down your debt interest-free over several months.

Alternately, you could apply for a card before the holidays that offers a 0% APR period on purchases. If you can’t pay off a high-interest credit card right away, a 0% card buys you time to chip away at the balance without interest.

Whatever you do, figure out how to get rid of your debt quickly to save on interest and stash your cash for next year’s holiday season.

More from U.S. News

Credit Utilization: Understand How It Impacts Your Credit Score

How to Read (and Understand) Your Credit Card Statement

Why Is My Credit Card Being Declined?

Do’s and Don’ts of Using a Credit Card at the Holidays originally appeared on

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