The holiday season is a time of joy, celebration, and, unfortunately for many, financial stress. It’s easy to get caught up in the excitement of gift-giving and festivities, leading to overspending and a hefty credit card bill come January.
However, with proper planning and budgeting, you can enjoy the holiday season without breaking the bank.
Before you start swiping, tapping, or clicking add to cart, read these simple tips for holiday credit card spending to help ring in a financially healthy new year.
Navigating holiday spending habits.
It’s no secret that the holiday season is a time for indulging in delicious food, drinks, and gift-giving. However, our spending habits can get out of hand with temptations around every corner.
Credit cards are a convenient way to make purchases, especially during the holidays. However, it’s important to remember that credit cards are not free money. Every swipe adds up and can quickly lead to debt if you’re not careful.
Some common risks of excessive credit card spending include:
Interest rates
Credit card interest rates can be high, especially if you carry a balance. This means that the longer it takes to pay off your credit card bill, the more money you’ll owe in interest. If you find you need to carry a balance choosing a low interest rate credit card can help save you money in the long run.
Overspending
With credit cards, it’s easy to lose track of how much you’re spending. If you’re not keeping an eye on your spending, it could pile up into debt, surpassing your ability to pay off balances entirely. Keep track of your Vancity credit card spending using the Manage my Visa card website. With Manage my Visa card, you can also set alerts when you’re close to reaching your credit limit or customize spending limits for added control.
Impulse buying
The holiday season is full of sales and deals. Before giving in to holiday sales and deals, ask yourself a crucial question: “Do I really need it?” With unnecessary purchases piling up, it’s easy to accumulate a hefty credit card bill.
High credit utilization rate
Your credit utilization rate is the percentage of your credit limit that you’ve used. High credit utilization rates can negatively impact your credit score, making it harder to get approved for loans and better interest rates in the future.
Before giving in to holiday sales and deals, ask yourself a crucial question: “Do I really need it?” With unnecessary purchases piling up, it’s easy to accumulate a hefty credit card bill.
How to use your credit card wisely
Navigating credit cards responsibly opens up opportunities to improve your financial stability. When used judiciously, credit cards can provide perks such as points for redeemable rewards and supporting environmental initiatives with every tap.
Here are some tips to help you use your credit cards wisely during the holidays.
1. Create a holiday budget
One of the best ways to manage your holiday spending is by setting a budget. Start by listing out all of your holiday expenses, including gifts, travel, food, and events. Be realistic about what you can afford and stick to that budget. This will help prevent overspending and stacking up expensive credit card debt.
2. Choose the right credit card
When it comes to holiday spending, using the right card matters. Before you dive into your wallet, consider the following:
- Low-interest rate card: If you think you might carry a balance, shop with a low-interest rate card to reduce interest charges.
- Purchase security insurance: If you’re purchasing gifts, consider cards that offer purchase security insurance. Depending on the coverage, this insurance can cover eligible items if they are lost, damaged, or stolen.
- Extended warranty insurance: Some credit cards also offer extended warranty insurance, which can extend the manufacturer’s warranty on eligible purchases. This can save you money down the road if something goes wrong with your purchased items.
- Reward points: Rewards cards can be a great way to earn points and other perks like cashback on holiday spending. Most Vancity enviro™ Visa* credit cards allow cardholders to earn points on their everyday spending. Plus, 5% of profits from all enviro Visa cards go towards the Vancity enviroFund™ program every year to help support environmentally friendly initiatives.
If you’re purchasing gifts, consider cards that offer purchase security insurance. Depending on the coverage, this insurance can cover eligible items if they are lost, damaged, or stolen.
3. Maximize rewards
Make the most out of your credit card rewards by using them strategically. Consider redeeming points for gifts, travel expenses or cash back, and shopping at stores that offer additional rewards or discounts for using your credit card.
For example, the Vancity enviro™ Visa* cards offer 2x the points when you book travel through Vancity Rewards. You’ll also get extra rewards for purchases like groceries, public transit, and shopping at local businesses. We also offer a penny-a-point redemption rate, so you always know the true value of your rewards.
Staying financially health in the new year
When the last of the holly has been taken down, and the smell of gingerbread begins to fade, it’s time to start looking toward the new year. While even the savviest holiday shoppers may have a credit card bill to pay off, the following tips can help you get back on track and start the year on solid financial footing.
- Pay off your credit card balance in full: If you were able to stick to your budget and not overspend, try to pay off your entire credit card balance before the grace period ends. If you’re finding it difficult to pay off your balance in full try paying a little more than the minimum balance as this will help reduce interest rate charges, saving you money in the long run.
- Create a post-holiday budget: Just because the holidays are over doesn’t mean you should abandon budgeting altogether. Create a new budget for the new year, including any leftover debt from holiday spending.
- Consider balance transfers: If you’re struggling to pay off your credit card bills, consider transferring your balances to a lower-interest-rate card. This can help you save money on interest and make it easier to pay off your debt.
- Set financial goals: Use the start of the new year to set financial goals for yourself. Whether building an emergency fund, saving for a vacation, or paying off your credit card debt, setting concrete goals can help keep you on track and motivated. Consider using automatic payday transfers into separate savings accounts labeled for each goal, so you won’t be tempted to overspend.
Looking to give back to the planet this year? Consider using a Vancity enviro™ Visa* credit card and support the Vancity enviroFund™ program while earning rewards on your everyday spending. Learn more about our eco-friendly credit card options here.
enviro™, Carbon Counter™ and Vancity enviroFund™ are trademarks of Vancouver City Savings Credit Union.
* Trademark of Visa Int., used under license.
