Photo (cc) by Massachusetts Office of Travel & Tourism
‘Tis the season to shop. If you’re like most Americans, you’ll be whipping out your credit card to pay for a number of gifts this holiday season without any concern for how that could affect your credit standing.
According to a new survey from TransUnion, 80 percent of consumers plan to charge at least some of their holiday purchases on credit cards. Yet a majority (60 percent) gives little thought to the potential credit risks associated with that spending.
TransUnion senior vice president Ken Chaplin said in a statement:
Detrimental effects to your score can be short-lived if holiday balances are paid off each month. It’s important to remember that carrying a balance month after month could have a negative effect on your credit standing.
The average American will spend $804 shopping this holiday season, according to the National Retail Federation.
Though 84 percent of survey respondents said they’re concerned about the affordability of this year’s gift list, only 4 in 10 consumers established a gift-giving budget, TransUnion said.
To wisely use your credit cards and help ensure your holiday spending doesn’t have a lasting impact on your credit standing, follow these tips:
- New cards. It may be tempting to apply for a new store credit card during the holidays, especially when they come with special offers and discounts. But beware that your credit may take a short-term dip as a result.
- Know your credit card info. Before you use your credit cards to holiday shop, make sure you know the interest rate and balance (if any) you owe, TransUnion said. Using more than 30 percent of your credit limit can raise your credit score.
- Pay your balances. To avoid paying more in interest than you have to, pay off your credit card balances with the highest interest rates first.
- Budget. Establish a gift budget before you shop, and stick to it.
Going overboard on holiday spending can have lasting effects on your finances. Is it worth it?
I overdid my Christmas shopping for my kids last year. I failed to make a gift list or budget, and I spent more than I intended. I won’t make the same mistake again. This year I’m tracking my purchases and spending, so I don’t go over my budget.
Money Talks News’ Stacy Johnson offers some tips to keep you from blowing your holiday budget in this video.
How do you typically pay for your holiday gift purchases? Share your comments below or on our Facebook page.