Black Friday and Cyber Monday have come and gone, but we are still in the midst of the busiest shopping season of the year. It’s easy to get carried away as you shop for your family and friends, and it can be tempting to make a number of mistakes with your credit cards. Unfortunately, if your credit score drops, it can take months or even longer to repair the damage. So follow these steps to protect your credit score as you fill your holiday gift list.
Resist the urge to max out cards. It can be tempting to spend a bit more and purchase luxurious gifts, and even if you can pay off the balances within a few months, it’s a bad idea to max out your credit cards. Part of your credit score is calculated by comparing your available credit with your card balances. If you’re using most or all of your available credit, your score takes a hit.
Don’t cancel cards. Toward the end of the year, a lot of people make New Year’s resolutions to get rid of credit cards, but if you cancel the accounts, you’ll lower your available credit, which can damage your score. Plus, if you have an emergency down the road and need credit, you may have to re-open new cards, which again can damage your score.
Don’t always pay cash! Paying cash for everything, rather than using credit, seems like a responsible idea, and it is… sometimes. If you make a habit of always paying cash, you miss a valuable opportunity to build a solid credit history. Just stick with a spending limit and pay off the cards the following month whenever possible.
Don’t apply for credit line increases. Stick to your gift budget, and resist the urge to apply for credit line increases. If you’re denied, that inquiry will stay on your credit history for months, and will damage your score.
Be careful with store cards. Individual stores might offer you 20 percent off, or some other valuable incentive, in exchange for opening a store account. However, if you start taking advantage of too many of these offers, you could go way over your gift budget. Not to mention, store cards often carry a much higher interest rate.
Protect yourself online. Online shopping is super convenient, but it can be dangerous if you aren’t careful. Check to be sure that you’re on a safe website before entering card information, by looking for “https” or a lock symbol in the address bar of your browser.
Of course, the best way to protect your finances during the busiest shopping season of the year is to make a list, set a budget, and stick to it! Resist impulse purchases, and only charge what you can pay off in January. For more information on budgeting or saving, give us a call. We can help you with your long-term financial strategy.