How Your Credit Card Can Help and Hurt During the Holidays

While you will likely take your credit card with you on your shopping trips this holiday season, you should take care to avoid overspending or signing up for more cards than you need. Although credit cards are great for earning rewards, they could also lead to you accumulating more debt.

Here are ways credit cards can help and hurt you during the holidays:

Help

Earn Extra Rewards
Some credit card issuers have special periods where you can earn more rewards depending on where you shop or spend money, such as Chase Bank. Plan your holiday shopping at these stores and take advantage of this chance to speed up your rewards earning. You could then use those rewards to get those perfect gifts your loved ones have had on their wish list all year.

Save Money with Store-Offered Discounts
Store credit cards are an effective way to save money at your favorite stores. If there are retailers that you frequent this holiday season, inquire whether they have a store credit card that you could apply for discounts. A store credit card could allow you to save a percentage on each purchase or even offer other perks like free shipping.

Hurt

Pay High Interest Rates
While plenty of websites and stores offer credit cards in exchange for discounts, determine how often you will use your card and whether you are able to pay off your balance each month. The biggest reason for this is high interest rates, or annual percentage rates. When you have multiple credit cards with high interest rates, you could end up paying more in interest than you save in discounts. If you swipe a store card and forget to pay your bill or only submit the minimum payment each month, these rates could accumulate interest fast.

Drops in Credit Score
Although you are looking for the right credit card that gives you the chance to earn plenty of rewards, be aware that there are ways your credit score could decline, including through hard inquiries. Whether you are applying for a new card from a retailer or a big bank, your application could result in a hard inquiry, which could knock your credit score down a notch. Not only can you see a lower credit score from simply applying, you could find yourself overwhelmed with paying bills for multiple credit cards, which could lead to increased interest costs and the potential for accounts to end up in collections.

How to Avoid Excess Spending During the Holidays

While you may have concerns about overspending during holiday shopping, there are ways to maximize your rewards potential without spending too much, including:

Sign Up for Cards with Great Introductory Offers
When you first sign up for a new credit card, you may notice that some will offer a 0 percent intro APR. In addition to saving you money on interest in this initial period, you could determine whether you use the card enough for it to be a mainstay in your wallet or if you could do without it in the future.

Get the Most Rewards for Your Card
You may be looking at a credit card at a favorite store, but consider signing up for a card that will allow you to get rewards at the most places. Some credit cards will allow you to earn rewards not just at one particular retailer, but a variety of different stores or for different items, like gas and restaurants. The versatility of the card could give you the chance to avoid applying for three cards, when one card will do, saving you drops in points from hard inquiries and additional fees from having several cards.