Has Holiday Spending Been Ruining Your Credit?
During the end of the year holiday season, Americans spend more on gifts than anyone else and a lot of that spending is done via credit cards or merchandise cards. Now, with Thanksgiving approaching and hundreds of attractive Black Friday sales just around the corner, it’s more important than ever to take a close look at your finances to make sure you’re not destroying your credit.
The National Retail Federation estimates that the average American spends $700 during the holidays for a total of over $465 billion. That’s a lot of spending and it’s the biggest time of year for consumers to rack up credit card debt which can severely damage your credit score if you aren’t maintaining a good debt to credit ratio.
What To Consider Before Swiping Your Credit Card
A few things you should consider before swiping your credit card during Black Friday weekend:
- Keep your Debt-to-Credit Ratio below 50% (or, even better, below 30%)
- This means that if your credit card limit totals $10,000, you should keep the balance on the card below $5,000 or, for ideal credit, below $3,000. Maxing out your credit card(s), even just for a short time, can negatively impact your credit score, potentially costing you thousands in the long run.
- Pay Off or Make Monthly Payments on Time
- If you do choose to use your credit cards to buy something for your friends and family during the holidays, make sure you make your monthly payments on time. This may seem obvious but many consumers, after putting a lot more than usual on their cards, sometimes find it difficult to make a higher payment due to the higher balance but making a payment late can drop your credit score by over 30 points!
- Pre-plan Your Holiday Budget
- To avoid overspending or getting pressured into spending more than you expected, it can be very beneficial for you to pre-plan your holiday spending budget. Check your finances and determine how much you can spend without creating a financial burden on your household. Don’t forget, if you’re using credit cards, make sure you factor in the interest as well since it can affect the total of your monthly costs. Having a pre-planned budget can help you avoid making spontaneous purchases or from succumbing to a holiday sale that you come across.
Keeping Your Credit Score High Means You Can Spend More
Now, we know nobody wants to be told that they can’t spend a lot when there’s so many awesome sales going on but, while you may be saving money by buying when there is a sale, many people tend to spend a lot more than their finances would usually permit, causing them to fall into heavy debt.
There is some good news though. When you’re careful with your spending and maintain good credit, your credit score will go up which will allow you to spend more. Why? Well because, with a higher credit score, your interest rates will be significantly lower which can save you hundreds of dollars in interest on your credit cards alone. Additionally, on larger purchases, like your car or home, you could save thousands of dollars. So, why give all that extra money to your creditors when you could be using that extra money on all these sweet sales going on.
Need help building your credit score up or repairing your credit? Contact Credit Absolute for a free consultation today! (480) 478-4304