10 Ways to Keep Your Credit Score Healthy and Avoid Shopper's Remorse During the Holidays
During the holiday season, it seems that no matter how early those store decorations go up, we feel as though we’re suddenly caught off guard. Our holiday shopping turns into a sprint, and then quickly deteriorates into a spending frenzy. “The heck with the budget full speed ahead! Cha-a-a-r-r-r-ge it!” Like any binge hangover, once the fog clears from our pounding head, we are reminded of our misdeeds committed under the influence of credit cards as the monthly statements pour in. And, then we groan, “I’ll never do that again.” Okay, this is your chance to avoid the holiday shopping hangover and keep you credit score from taking a January dip.
Get your plan together, stick with it and the only hangover you might get is from a few hot toddies. We can live with that.
- Start with a clean slate: Hopefully you have managed to pay off your balances so that when you’re ready to hit the malls your limits are intact. It’s important to avoid hitting or going over your credit card limits.
- Fix your budget: Of course, this should have been done well in advance of the holidays so that you have been able to meet your living needs while setting aside savings. For many of us, holiday shopping requires that we tighten our belt for a few months. Look for non-essential budget items and cut them out until after January.
- Set a spending limit: How many times have you set a holiday spending limit only to blow through it before the hot toddies are even served? Do it for real this time. Set it and follow it. Don’t forget to include all of the holiday trimmings in your limit, such as drinks, meals, holiday travel, service tips (hair salon, paper boy, etc), and last minute gifts.
- Make a list: Don’t make your gift list until you have set your spending limit. It will help you prioritize your gift giving and allocate amounts to be spent. It’s supposed to also keep you from impulse shopping. If it’s not on your list, just say no.
- Spurn new offers: Tis the season for credit card offers. Good ones can lower your costs, but be careful about adding new credit cards just to increase your spending power (remember your spending limit). And, retail credit card offers should be avoided at all costs they do little to increase your spending power and they can wreak havoc on your credit score.
- Spread it around: If you have more than one credit card, it would be important to spread your spending among them so as to avoid hitting the credit limit thresholds. If possible, you want to keep your balances below 30% of the credit limit on each card. Even if you intend the pay the balances in full, a maxed-out card can cause a temporary hit to your credit score.
- Reward yourself: This is the time to optimize your rewards and cash back strategy. Focus on opportunities to earn maximum cash back. Use your rewards points to purchase gifts when you can (they’re great for gift cards). And, check out your credit card’s online shopping mall for additional discounts.
- Be on fraud alert: Identity thieves and credit card fraudsters are out in full force this season, and it can’t be stressed enough to be on alert. Limit your online purchases to familiar shopping sites and never lose sight of your card at stores or restaurants.
- Be of good cheer: Studies show that people spend more and shop more impulsively when they are feeling in the dumps. Avoid using shopping as a means to lift your spirits. Get in good spirits before you go shopping.
- Pay it all off: This is the biggie. After you have run up your balances, you need to pay them off. For most people, the debt they run up during the holidays sets the tone for the next year. At the very, very least, make sure you pay down your balances to below 25% of the credit limit for each card.