The Top Do’s and Don’ts of Opening and Using Credit Cards During the Holidays

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The holidays can be expensive and chaotic. It might be tough to stay on budget as a result, both due to buying expensive gifts or unforeseen circumstances such as a missed flight.

We’ve Got You Covered: GOBankingRates’ Smart Holiday Spending Guide
Tips: How To Use a Credit Card Like a Pro This Holiday Season

Even if you would strongly prefer to stay on budget, opening a new credit card during the holidays might seem like such an easy solution to budgetary constraints during these crazy times. However, credit cards can also be a slippery slope.

Hence, it’s important to know the do’s and don’ts of opening and using credit cards during the holidays. We asked for input from credit card experts who gave their best tips on the topic. Before you run out and open a new credit card, read on for the top do’s and don’ts of opening and using credit cards during the holidays.

Good To Know: 18 Reasons Why You Should Be Using Your Credit Cards More

Earn More Perks From Your Credit Card

Do: Pay More Than the Minimum

Paying the minimum balance on your credit cards is good in that it keeps you from having late payments or derogatory marks on your credit report. But it also ensures you’ll keep paying as much interest as possible, said Briana Cousins, financial education coordinator at Redstone Federal Credit Union. “Pay more each month or you might not pay off this Christmas until June of 2023. And that animatronic baby yoda might cost you $100 instead of the $59.99 you thought you paid.”

There are countless stories of these situations where people end up spending as much, if not more, on interest payments than they spent on the original purchase. While this can be tough to do if your budget is tight, paying more than the minimum is always a good idea.

See: 4 Credit Cards That Are Great for Day-to-Day Errands

Do: Take Advantage of Rewards and Cash Back

One advantage many credit cards have is offering rewards and/or cash back. This perk lets you earn points or cash back, meaning they are effectively a discount on your purchases (assuming you pay them off). Cousins said that rewards can be higher during the holidays, too, allowing you to maximize this benefit. “Utilize increased rewards (like double points) that are often offered during the holidays. Take advantage of low to 0% introductory rates.”

Learn: The Top Purchases You Should Always Make With a Credit Card

Do: Stick To the Basics

While the holidays are unusual in a lot of ways, the basics of opening credit cards still apply. “The initial process of finding a good credit card shouldn’t be any different during the holidays than it is during the rest of the year,” said Michell Lambright Black, credit expert and founder of CreditWriter.com. “First, you want to check your three credit reports from Equifax, TransUnion, and Experian. It’s not a bad idea to take a peek at your credit scores too.”

In general, you can request your free credit report once per 12 months. Checking your report lets you know how you are doing with your credit. “If your credit is excellent, you may have your pick of credit card offers,” Lambright Black said. “If your credit is fair or bad, however, you should look for credit card offers you’ll be most likely to qualify for in your current credit condition.”

Earn More Perks From Your Credit Card

Read More: The Quickest Ways To Pay Off Your Credit Card Debt

Don’t: Be Quick To Open a Store Credit Card

If you have ever shopped at a brick-and-mortar clothing store, you’ve almost certainly been asked about opening a store credit card. That scenario will only be more likely during the holidays, and you might wonder whether store credit cards are a good idea.

If you’re considering a store credit card in an effort to save some money (i.e., take 15% off your purchase), opening a new account may not be a good idea,” Lambright Black said. “Store credit cards also represent an expensive way to finance purchases. Even people with excellent credit may face higher-than-average interest rates with retail store cards.”

There are other red flags to keep on your radar when it comes to store credit cards. For example, the limit on them can leave something to be desired. “Finally, these types of accounts tend to come with low credit limits,” Lambright Black said. “So, it’s easy to run up a high credit utilization rate on these retail store cards, even with a relatively small balance. A high credit utilization rate can hurt your credit score, so if you do open a store credit card, pay close attention and be sure to keep your balance-to-limit ratio low.”

See: Why It’s Still Better To Use Your Credit Card Over Your Debit Card

Don’t: Open Too Many Cards

Opening numerous credit cards can be tempting because it opens up more credit. That means, at least in theory, you’ll be able to spend more. Plus, there might be several stores you frequent, and each of them might have a loyalty program with added benefits for the store credit card.

Despite their apparent benefits, though, more store credit cards are not always great for the consumer, Cousins said. “If you already have credit cards or store cards, be careful of opening more lines of credit – even if you get a discount off your purchase for doing so. The hit your credit will take is not worth a few dollars off.”

Indeed, opening multiple credit cards can hurt your credit, at least in the short term. You might also start seeing rejections if you try to open too many credit cards too quickly. Card issuers see this as a red flag and might deny your application as a result.

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Last updated: Nov. 2, 2021 

About the Author

Bob Haegele is a personal finance writer who specializes in topics such as investing, banking, credit cards, and real estate. His work has been featured on The Ladders, The Good Men Project, and Small Biz Daily. He also co-runs Modest Money and is a dog sitter and walker.

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