Prevent the “Holiday Hangover” with these 5 tips

Summary

• When you’re in the holiday spirit, it can be easy to get carried away by store sales and the gifts you want to buy; however, it’s important to stick to your budget when purchasing holiday gifts.
• Frequently monitor your credit score so that you know what’s impacting it. 
• Remember the 30 percent rule when it comes to credit utilization. 

Ever heard of the Holiday Hangover? We refer to this as the aftermath of the holiday spending.  It’s fun to get in the holiday spirit and buy decorations and presents for family and friends, but it can also be easy to spend more than your set budget. This overspending and debt accumulation (if you’re paying with credit cards) could negatively impact your credit score. 

Below are 5 tips to help you keep tabs on your credit score during the holiday season: 

1. Avoid overspending

Make your gift list and check it twice—and then try to stick to it. It can be too easy to spend an additional $5 here and $10 there when shopping for family members and friends. It’s also too easy to be swayed by the sales and buy a few additional gifts.  However, these all add up, and before you know it, you’re way over budget.

 2. Monitor your credit score frequently

It’s important to continually monitor your credit score so you are aware of the activity that could impact it. The holidays can be a popular time for potential fraud activity as well, so keep an eye out for any inaccuracies as well so you can report them immediately. You can monitor your score for free at Credit Sesame.

3. Try not to max out your credit cards

Aim to stick to the 30 percent rule (keeping your total credit card balance under 30 percent of your credit limit). Since credit utilization is one of the biggest factors that impacts your credit score, you may see your credit score drop if you accrue a higher balance.

4. Be aware of the downsides of retail store cards

Retail stores may try to lure you to sign up for their credit card usually by offering you a major discount on your purchase. In general, the credit limit is often low, making it challenging to purchase several items or one big item because you can quickly find yourself over the 30 percent mark. In addition, opening a store credit card will trigger a hard inquiry. Both the high credit utilization and the hard inquiry could potentially lower your credit score. Oftentimes, retailer credit cards also have higher interest rates and could cost you more in the long run if you don’t pay them off in full. However, if this is a store you shop at frequently and would benefit from the bonus points and discounts, then it may be a good option for you.

5. Continue to pay down your bills during the holiday season

It’s critical to pay your bills on time, since a missed payment could drastically impact your credit score. If you cannot pay your credit card bill in its entirety, that’s ok! As long as you pay at least the minimum each month, you can help protect your credit score.

Enjoy the holiday season, but don’t let your guard down when it comes to your credit.  The holidays are an exciting time (and a bright spot in 2020!). But don’t let the spirit lead to too much of a hangover in January.