The festive season is upon us, which means it’s time to shop. Many of us use our credit cards over this time, but using your credit card for all your holiday purchases can easily lead to a debt hangover when the new year hits.
You are able to make your holiday shopping experience smoother by using your credit card responsibly and knowing what you should avoid.
Festive Season Credit Card Dos
Know Your Credit Card Rewards
There are a number of credit cards that offer rewards when you use them. This can be in the form of cash back, discounts at certain online stores and points that you can then spend at specific stores. You may have been earning these rewards throughout the year and if so then this is the time to use them.
You are able to redeem points, for instance, and spend these on your holiday purchases at partner retailers. You can also increase the number of rewards you earn by using your card’s online shopping gateway. These stores may offer you discounts, points or even cash back.
You should look at what rewards you are able to get with your credit card and see how you can use these to your benefit over the Christmas period.
Create a Spending Budget
Using a credit card over the holidays doesn’t mean that you can shop without any thought. Credit cards are a lot easier for us to use and we don’t feel as bad when we pay with one when compared to cash, but this means it can lead you to spend more.
You should definitely have a budget in place for the festive season. Create a list of everyone that you plan to buy gifts for and how much you want to spend. Take a look at your monthly income and expenses and see what you can reasonably afford to spend and still be able to pay your credit card off in full once it’s all done.
If this doesn’t match what you have budgeted then you may need to cut back on the amount that you are spending on gifts. Another option might be to transfer the balance to a card with 0% APR, but you need to be sure you will be able to pay the balance off before the promotional rate ends so that you can avoid the interest.
Shop Safe and Watch Your Accounts
Credit card fraud can occur at any time, but it does seem to be more prevalent over the Christmas season when we are swiping our cards more often and shopping online more. If you are concerned about your credit card safety when shopping in-store or online then here are some things you can do.
- Always insert your cards security chip into a machine rather swiping the stripe as this offers more protection.
- You could link your cards to a reputable mobile payment app and use this to pay for purchases for extra security.
- Make sure the websites you use for online shopping are secure and have security measures in place.
- If you are on a public Wi-Fi, then avoid using your credit card to make an online purchase.
- Practice caution when making credit card purchases from third parties. Verify the seller’s information before you hand over your credit card details.
- Create account alerts that notify you of new purchases and check your statements often for any signs of fraud.
Wait…You Need to Know What to Avoid…
Festive Season Credit Card Don’ts
Chase Store Card Discounts
Over the festive season, you may start to feel that you are being offered a new credit card at every store you go into. Retailers may offer large discounts on your initial purchase, store vouchers or other incentives aimed at tempting you to take one of the store cards.
However, even though store cards may offer initial savings, in the long run, these cards won’t prove to be as effective as traditional rewards credit cards, especially if you don’t go to that store often.
Also, a retail store card may charge a higher annual percentage rate for purchases compared to a regular credit card, which means it will cost you more over time if you carry a balance.
Keep in mind that each enquiry for any new credit will reflect on your credit report and adding multiple credit cards over the festive period will take points away from your credit score.
Max Out Your Cards
Your credit score is largely determined by your credit utilisation ratio. This ratio shows how much of your available credit you are using at any time. Having a high balance will then have a negative impact on your credit score.
If you have multiple credit cards, then avoid maxing all of these out over the holidays by just using one card for shopping.
This should be the card that offers the highest rewards on purchases or the card that has the lowest APR for purchases.
Stick to one card and watch your balance to ensure that you are staying in budget. You can set up a text or email alert that notifies you of every purchase made or when your balance reaches a certain level.
The holiday season is here and we are all tempted to shop, shop and shop, especially with so many retailers offering specials and discounts during the season, but don’t get silly with your credit cards because once the festivities are over you will just be saddled with debt.