Follow These Rules When Using Credit Cards During The Holidays

See how you can avoid the credit pitfalls that plague many once the end-of-year shopping season kicks in.

Your credit cards can come in handy during the holidays. They can also create problems, however, if you use them without too much thought.

What’s the best way to use credit for holiday gifts, food, travel, and other expenses so you don’t end up drowning in debt or other issues? Follow these rules, and you should be good to go:

1. Set a budget.

Credit cards often lead to increased spending since they delay the pain of paying with cash. Instead of forking over your hard-earned money, you can simply swipe to get what you want instantly.

Unfortunately, this delayed pain can cause you to overspend in a heartbeat. By having a budget in place and sticking to it, you’ll avoid the common trap of thinking credit cards are “unlimited” cash.

Figure out how much you can reasonably spend during the holidays. Subtract your monthly expenses from your income and come up with a figure from what’s left.

To be safe, don’t make the figure higher than your disposable income. Doing so will put you into debt by using credit cards.

2. Don’t collect new cards.

You’ll be swamped with offers of new credit cards from retail stores and other avenues. Avoid this temptation, as it could lead to further debt quickly.

Many retail store cards can lead to instant discounts, but they may have high interest rates that make them too costly. Also, applying for too many cards can increase inquiries on your credit report. This can lead to a lower credit score that results in a higher cost of borrowing later on.

3. Avoid maxing out your cards.

Getting too many inquiries on your credit report can lower your score, as can maxing out your current cards. For this reason, try to avoid maxing out multiple cards if your spending gets out of hand.

The higher your balances, the worse your credit utilization ratio. The worse your ratio, the lower your credit score.

To keep this maxing out issue at bay, use one main card for your holiday spending. Be picky about the one you choose too.

For instance, if a card has the lowest APR among your collection, use it to save on interest. Or if it offers plenty of rewards like cash back on purchases, use it to get the most bang for your buck.

By using one card, you also make it easier to monitor your purchases and keep things under control.

4. Monitor and protect your accounts closely.

Speaking of monitoring purchases, you’ll want to do so throughout the holiday season. Credit card fraud is extremely high during the holidays, so keep an eye out for any odd charges.

Set up alerts on your accounts so you instantly see any new purchases. Check your accounts frequently as well.

When checking out in person, use your card’s chip instead of swiping, as it adds extra protection. If buying something online, make sure the site is well-known, secure, and has an SSL security certificate. Do not make any purchases if you’re connected to a public Wi-Fi network.