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The holidays are coming. Read on to see how to steer clear of a credit card mess as that season approaches.
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Although it’s only the end of September and the days are still nice and long, the holidays will be here before we know it. And while the holiday season is, at least for some folks, the most wonderful time of the year, it can also be the most expensive time of the year.
That’s why it’s so important to be savvy with your spending ahead of the holidays. You don’t want to rack up debt before the holiday season only to then pile on in November and December. And so to that end, in the coming month or so, it pays to do everything you can to avoid these credit card traps.
1. Chasing a welcome bonus
Many credit cards offer welcome bonuses that put a lump sum of cash back or reward points in your pocket if you meet a certain spending threshold within a few months of opening your card. But if you rack up extra charges in the coming weeks for the express purpose of snagging that bonus, you might kick off the holidays with debt.
That could make the season more stressful for you. It could also create a scenario where your credit card balances spiral out of control as you add to them in November and December.
A better bet? Don’t buy extra things just to snag a welcome bonus. If your deadline to meet your spending threshold for a recently opened card is early November, don’t spend the next five weeks or so making additional purchases. Even if they result in a $200 payday, you might lose more than that to interest charges by carrying your balance for a long period of time.
2. Taking advantage of a 0% introductory APR
If you have a credit card with a 0% introductory APR, you may be inclined to use it as often as possible while that interest-free period is still in effect. But remember, once that introductory period comes to an end, the interest rate on your existing balance has the potential to soar. And if you then add to that balance during the holidays, it could make for a financially devastating situation.
If you have a credit card with a 0% introductory rate, first, pay attention to when that period wraps up. And then, make a plan to get ahead of your existing debt rather than continue to add to it.
You might, for example, be able to go out and get a seasonal side hustle that boosts your income. That could make it possible for you to knock out your balance before your introductory period ends and costly interest starts to accrue.
3. Applying for a store credit card
You may be tempted to apply for a store credit card or two in the period leading up to the holidays. That way, when you spend money at those retailers on gifts and other holiday purchases, you’ll be able to rack up rewards.
If there’s a specific retailer you shop at frequently, then it could pay to apply for a store credit card there, since you might benefit from not just rewards, but discounts and other perks. But in general, it’s a good idea to try to keep your store credit card collection to a minimum.
Remember, store credit cards are often closed-loop cards, meaning they can generally only be used at the retailer that issues them. And similarly, any rewards you rack up will generally only be redeemable at that retailer. But given that the holiday season is nearing, you may find it far more helpful to score cash back on your credit card purchases that you can use for any purpose.
You should also know that store credit cards are notorious for charging high interest rates. This means that any balance you don’t pay off in full could end up costing you big time.
If you’re someone who loves the holidays, then you may already be starting to get into that mode, despite the fact that we’re still months away. But do your best to avoid these credit card traps so they don’t mar the season in any way.
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