By Sandra Fry
The reality of cold, crisp winter air can often be one of the triggers for us that the holidays are right around the corner, and with that comes shopping season. It starts with Black Friday followed by Cyber Monday, Christmas promotions, Boxing Day post-holiday sales and don’t forget the year-end clearance deals.
Even though we try to keep materialism at bay during this season, many of us increase our spending dramatically during these two months. Some may even consider it a necessary part of their culture and family traditions, rooted in generations of celebrations.
As a credit counselor, I would be remiss if I didn’t mention the benefits of budgeting and sticking to the limits for this spending spree. Spend some time planning ahead to help you save money and stay on track.
It also relieves some of the extra stress you may feel from last-minute shopping and overspending while beating crowds at malls. Starting your planning early in the season by creating a budget and shopping list can be one step in getting out of the holiday spending trap.
While that may very well be good advice — for next year — it might not help you right now if you haven’t started your planning yet. Maybe you intended to save and shop throughout the year, but life happened and your savings and plans went elsewhere. Unfortunately, this does not prevent the holidays and your obligations from coming all the same.
In this situation, using credit may seem like the only option for you. But before you cringe, remember that credit isn’t inherently good or inherently bad. He is How? ‘Or’ What we choose to use credit which makes it useful or harmful.
Credit can be a great tool to help us get those things we couldn’t otherwise afford, like a house or a car. But credit is not a right; it is a privilege that is obtained after proving that you are used to repaying your debt as agreed.
One of the many indicators that creditors can use to determine your creditworthiness is your credit score. Establishing a good credit history takes time and intention. Your credit score is dynamic and can go up or down over time, depending on a number of factors, including, most importantly, how often and how quickly you pay your bills.
Since using credit is a current reality for many this holiday season, here are five tips that will help you maintain your credit score and use credit responsibly during this upcoming holiday shopping season. .
Don’t use credit that you can’t repay within three months
Have a spending plan and a debt repayment plan ahead of time can help alleviate some of the guilt and stress associated with a holiday hangover.
Do not apply for or open new credit card accounts
The amount of credit you have open and the number of times you apply for credit over a 12 month period can negatively impact your credit score. Remember that any credit applications you make will remain on your credit report for three years.
Keep your credit card and line of credit balances within approximately 65% of the limit and don’t go over your card maximum
Having near or borderline credit can negatively impact your credit score and signal concerns about household cash flow to potential lenders. This will limit their willingness to lend to you. For example, if you have a credit card with a limit of $1,000, you should try to keep the outstanding balance below $650.
Make your payments on time
Whatever forms of credit you use, making your payments on time is the action item that will have the biggest impact on your credit score.
Pay more than the minimum payment due
Only making minimum payments over a long period of time and never paying back what you owe will negatively impact your credit score and your wallet.
Also, with many forms of credit, any amount you pay above the required minimum payment goes directly toward the principal amount borrowed (not interest or fees). This means that any amount above the minimum payment will affect the time it takes to pay off your debt. and how much you will pay in interest.
Remember that credit is neither good nor bad; it’s how we use and manage it that can have an impact. When you set out to do your holiday shopping, no matter how much you have saved for your expenses, make sure you have a plan if your plan is to use credit.
Sandra Fry is a credit counselor in Winnipeg with the Credit Counseling Society, a not-for-profit organization that has been helping Canadians manage their debt for over 25 years.
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