Common credit card pitfalls during the holidays

If you’re reading this right now, chances are you have credit card debt. Rest assured you are not alone and it’s great that you’re here, looking for advice, resources, and solutions.

National credit card debt sees a huge increase over the holiday season in Canada, but it doesn’t have to be that way. Consider some of the dangers of the over-use of credit cards to help you recognize when it might be time to step away from the plastic. 

Interest

Interest is the most obvious downfall to over-using your credit cards. When you’re only making minimum payments on a high balance, interest will just keep growing and growing, meaning you could be paying for purchases two or three times their value before the card is actually paid off.

Ideally, you want to make sure you have room in your budget to pay off your balance in full every month from your personal bank account. Not only will you avoid interest, but this is the best way to increase your credit score.

Tap-to-pay

It is increasingly easy to overspend when you can just tap your card and walk away. If you’re the type of person who only looks at their credit card balance when the statement arrives – or worse, you’re never looking at it out of fear – then the balance due will likely shock you.

Regularly checking on your spending is the best way to say in line with your budget. Use your phone’s calendar to set reminders for yourself to review your balance a couple times a month so that you can stay on top of things. You could also opt-out of tap-to-pay and only insert your card in the machine to pay, which will allow you to see the actual total, giving you a few extra seconds to consider your purchase.

Over-limit charges

Similar to an overdraft charge on your personal bank account, most credit card companies now charge what’s called an over-limit fee. This is usually a monthly charge of around $30 when you’ve exceeded your credit limit.

Over-limit fees are laid out in your card’s terms of use, so make sure you review this information before activating any new card. Every month your balance goes over limit, you will be charged this fee.

Minimum payment due 

Not only does your interest grow, but so does your expected minimum payment due. This doesn’t consider that the recommended minimum payment on your credit card statement is already built for failure.

No one is going to make a dent in $1,000 worth of debt by only paying $20 a month – it’s just not possible. Carrying a balance month-over-month will only keep increasing the minimum payment due.

Once again, paying off your balance in full every month is the only way to stop the cycle.

Store-brand card incentives

Most big-box stores will have their own branded credit cards and often have employees walking around the store looking for new customers. They draw people in with either a free gift or a discount on your first purchases.

In the end, neither of those things is worth it. Employ your willpower and walk away.

Stress in the new year

By the time you’ve found this blog, you may have already over done it on the holiday spending and are on the hunt for solutions. One of the best things you can do when it comes to holidays, birthdays, or other big celebrations, is to start planning early.

Stashing a little away every payday starting in January will help reduce the financial pressure come December. You’ll be proud of yourself for relying on credit less and you don’t be inundated with worry when the post-Christmas credit card bill arrives. Resolving to start early every year will make a huge difference.

If you’re struggling with unmanageable credit card debt, talk to a Licensed Insolvency Trustee today. MNP LTD has helped thousands of Canadians like you get out of debt and back on track with budgeting plans that work. Call 310-DEBT or visit our website to find a local office near you.

We put the solution in New Year’s resolution!