The holidays are a welcome opportunity to spend time with friends and family. But it’s easy to get carried away with seasonal spending if you aren’t careful with your finances.
With more pressure to spend, it’s important to manage your money and protect your overall financial health throughout the season. That way, you’ll be prepared to start the new year with good spending habits already in place.
Keep these tips below in mind when determining how to maintain good credit and more effectively manage your finances during the holidays.
Keep Up with Minimum Payments
Carrying as little debt as possible can put you in the best position to manage holiday expenses. When you owe less each month, you may pay less in interest charges and have better overall credit.
Making minimum payments on your credit card each month is an important part of good financial health. Some significant advantages include the following:
- No late fees. When you’re consistent with your payments, you’ll be able to avoid costly late fees.
- Staying ahead of expenses. Steadily paying off your debt empowers you to keep improving your overall financial health.
- Maintaining good credit. Making monthly payments helps you take advantage of the benefits of using your credit card and helps improve your credit score.
Automatic payments are convenient and allow you to stay on top of the money you owe while saving you time. Plus, you don’t have to worry about forgetting a payment.
Monitor Your Credit Score
Your credit score is a metric that gives you insight into your financial health and allows lenders to understand the risk you pose as a borrower. Several factors comprise your credit score.
- Payment history
- Amounts owed
- Length of credit history
- Credit mix
- New credit
Certain factors like payment history and the amount you owe make up most of your score, with each weighing 35% and 30%, respectively. Ultimately, your credit score has an immediate effect on your finances and can be the difference between getting rewarded with a low interest rate or being charged more than average in light of your past financial pitfalls.
Understanding your credit score allows you to take charge of your finances and make an effort to increase your score through actions such as refinancing, decreasing revolving utilization, and addressing missed payments or debt sent to collections. No matter how low your credit score is, there are multiple legitimate ways to increase your score and rebuild your credit. Though it might be tempting, don’t hire a credit repair company as they don’t provide any more help than what you can do on your own.
We offer a free credit score service1 to members with a PSECU checking account or a PSECU loan. Once you’re enrolled, you’ll receive monthly updates about your score by text, push notification, or email. You’re also entitled to one free credit report annually from each of the three major credit reporting bureaus.
Think Carefully About Retail Store Credit Cards
It can be tempting to get retail store credit cards from all your favorite shopping spots for the season, but opening a new line of retailer-specific credit can have a negative effect on your score. Whether your application is approved or denied, a hard credit check can cause your score to dip temporarily. Plus, getting retail store cards can spike your overall credit usage if you begin to carry a balance on the card.
Another drawback of store credit cards is that they’re often limiting in where you can use them and what rewards you earn. For instance, you may only be able to use them at the retailer that issued them, and the rewards you earn may come in the form of percentages off or points toward a future purchase at that specific store. Instead, consider choosing a rewards card that allows you to earn rewards no matter where you shop and doesn’t limit when you redeem them or what they can be used for.
Check Your Utilization Rate
Credit utilization is the percentage of available credit you’re using. For example, if you had a total credit limit of $10,000 on credit cards and were using $5,000, you would have a 50% utilization rate.
It’s best practice to stay within a 30% credit utilization range. That means you should aim to consistently borrow less than 30% of your total available credit.
Before you start shopping, check your balances on your credit cards. Make sure that if you’re planning to carry a balance, you won’t be pushing yourself into a higher credit utilization rate which could negatively impact your credit. Even better, plan to pay all of your balances in full to avoid interest charges and so that you don’t get into the habit of charging more than you can afford.
Celebrate the Holidays with Our Founder’s Rewards Card
A Founder’s Rewards Card from PSECU will give you cash rewards on every purchase2, no matter the season. Our cardholders achieve more rewards, savings, and freedom with no category restrictions or reward expiration dates . See how your cash rewards could add up with our Founder’s Rewards Card today.
1PSECU is not a credit reporting agency. Members must have PSECU checking or a PSECU loan to be eligible for this service. Joint owners are not eligible.
2Some exclusions may apply. See the Visa® Founder’s Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.
The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.