For many of us, the holidays are only possible because of the plastic in our wallets. Credit cards give a critical boost to budgets far and wide during a spendthrift time of year, making them a convenient and necessary tool.
These tools can become crutches all too easily. To ensure you use your cards with intention, avoid the mistakes below.
1. Max Out Your Card
Let’s start this list strong with the biggest mistake you can make with a credit card. Maxing out your limit takes this account off the board as the usual safety net.
While you may be able to take out a line of credit in an emergency — click here to find out what to do if you need cash soon if you have an unexpected expense on your hands today — you won’t be able to use the maxed out account until you pay it off.
Until then, your purchases accrue interest and finance charges — meaning you’ll owe more even if you can’t add any more purchases. Plus, it affects your credit utilization ratio, which compares your usage to your total limit. Anything above 30% may lower your score — and 100% is a lot higher than that.
2. Take out Too Many Store Cards
A retail store credit card can come in handy around the holidays. It usually comes with store perks that help you stick to your budget, like exclusive discounts, early access to popular items, and even free gifts.
But like any credit card, a store card can have an affect on your credit. Opening too many at once may have a short, albeit real impact of your score, lowering it by a several points. It’s also harder to keep track of your spending and budgeting when you have multiple cards.
3. Swap it Out for Debit Online
Overspending is a distinct possibility with credit. Study after study shows people tend to buy more often using credit, and they’ll spend more.
It has to do with the psychology behind using credit to purchase something. It involves digital, invisible transactions that move money from your account. You don’t see or feel the loss of the money you spend like you do with cash, so you can easily lose track of how much money you use. Before you know it — you owe way more than you can afford to pay.
Using debit is one way to cut down on spending. After all, you can only spend what you have in your account; there’s no IOU of credit available. Unfortunately, using your debit online opens you to security vulnerabilities. If your retailer gets hacked, all your bank account information (and all the linked accounts) will be exposed.
4. Ignore Your Purchase Protections
Most cards come with unique purchase protections that can help you when the holidays go sideways. They include fraud protection, purchase warranties, and insurance on items that arrive broken. Some may even protect you against porch pirates, should someone steal you package from your property.
5. Forget About Your Rewards
Unlike personal loans and lines of credit, cards usually come with rewards. It depends on your account but many of them offer cashback, travel miles, and points you can redeem for merchandise.
Forgetting you sit on a mountain of these points happens to the best of us. According to a new survey, 23 percent of cardholders with rewards haven’t redeemed any of them in over a year. Don’t be like these people — redeem as much as you can during the holidays to keep you spending low.