The holidays are just around the corner, meaning shopping season is as well. But with the average credit card interest rate currently at 24.72%, it’s important to use caution when using your credit cards.
To start off the season right, here are five credit card mistakes to avoid before the holidays.
1. Paying Only the Minimum on Your Card
With interest rates as high as they are, you won’t get far by just paying the minimum payment on your card. If possible, make larger payments toward credit card debt. This helps you pay down debt faster and widens your credit utilization ratio (the percentage of your available credit you’re using), which in turn is good for your credit score.
2. Relying on Credit Card Rates Dropping
Even though the Federal Reserve cut the target interest rate in September, you likely won’t see much of a drop in your credit card interest rate anytime soon. While cardholders should see a minimal reduction, it won’t be enough to make much of a difference in what you owe. This means you should continue making payments and developing a plan to pay your debt off.
3. Letting Your Interest Pile Up
If you’re carrying debt month to month, your interest is compounding onto your debt. This makes it increasingly more challenging to pay off. One way you can help combat this is by transferring your balance to a card with a 0% introductory APR rate.
4. Rack Up More Debt Buying for the Holidays
It’s tempting to use your credit cards to buy presents, but doing so without a plan will result in even more debt. Make a budget and stick to it so you don’t overspend and regret it when the holiday season ends.
5. Fail to Ask For Help
Getting help with credit card debt can help you pay it off quicker and more efficiently. Take advantage of services like credit counseling agencies, which employ certified credit counselors to help you make a budget, set future goals, and get on a financially healthier path, like a debt management plan (DMP). If you enroll in a DMP, your counselor will work with your creditors to consolidate your credit cards into one monthly payment at a significantly reduced interest rate.
Bottom Line
By following these tips, you can help keep yourself from falling further into debt. You might also enjoy the holiday season more, knowing you won’t max out your credit card like 37% of cardholders have or come close to since 2020.