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

Quick Answer

When using a credit card during the holidays, do set a budget, track your expenses and spend your rewards. Don’t forget to pay your bill and protect your credit card information online.

A couple outdoors using credit card and mobile phone to pay for holiday shopping.

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The holidays are fast approaching, and this year, consumers are expected to spend an average of $1,530 for gifts, travel and entertainment during the season, according to PwC. Many are planning to pay using credit cards, which can be a great way to earn rewards, take advantage of introductory 0% annual percentage rate (APR) promotions and even protect your purchases.

But it's important to watch out for potential pitfalls along the way so you don't end up deep in debt as you ring in the new year. Here are some credit card do's and don'ts to consider as the holiday shopping season gets underway.

Credit Card Do's for Holiday Spending

As you prepare to use credit cards to make your holiday purchases, here are some ways you can get the most value out of them.

Create a Budget Early

Creating a holiday budget before the season is underway can help you plan your purchases and give you time to save money, which means less risk of going into debt. Start with a spreadsheet or a pen and paper, and list out your major holiday spending categories. These might include:

  • Gifts
  • Travel
  • Entertainment
  • Holiday decor
  • Food and drinks
  • Clothes
  • Charitable donations
  • Tips
  • Shipping

Then decide how much to spend in each category. If you're unsure about how much money to earmark, think about last year's holiday spending or pull up your credit card statements from this time last year. Consider padding your budget a bit to cover any surprise expenses.

Track Your Spending

Tracking where your money goes can help you stick to your spending limit—and the information can even help guide your budget next year. First choose a tracking method that works for you: a spreadsheet, pen and paper or a budgeting app. Then log each purchase, donation or tip that you make during the season. If you find yourself overspending in one area or getting close to your limit, you can cut back or make changes to the budget.

Pay Your Bill on Time

It's possible to miss a credit card payment when you're caught up in the holiday spirit and off your normal routine. But it's important to keep all of your accounts in good standing and your credit healthy. To ensure you pay your bills on time, consider one of these tricks:

  • Set up automatic payments. You can ask your card issuer to withdraw money from your checking account each month to cover the minimum payment, statement balance or another specified amount.
  • Set up text or email alerts. When you get a notification, you'll have time to either make your payment or ensure there's enough money in your checking account to cover automatic withdrawals.

Redeem Rewards to Offset Purchases

The holiday season could be a great time to spend your credit card rewards, especially if your card comes with a generous welcome bonus or you've been saving up your points, miles and cash back. Depending on the credit card and your redemption options, your cards could pay for:

  • Statement credits to reduce your credit card balance
  • Flights, hotel stays and car rentals if you're traveling during the holidays
  • Gift cards to hand out as gifts or to shop for your holiday needs

If you don't have a stockpile of credit card points and miles, consider earning rewards on your purchases this holiday season. But don't forget to follow your budget and monitor your purchases to ensure you don't overspend just to earn rewards.

Consider an Intro 0% APR Card

In an ideal world, you'd be able to pay off all of your holiday purchases by the end of the billing period so you don't end up paying interest. But if your finances are a bit tight, you may consider a card with an intro 0% APR promotion.

Some of these cards offer 12 months or more of no interest, allowing you to pay down your balance with no added charges. Just keep in mind that those payments will make it harder to save up for next year's holiday season—and if you haven't paid off the balance by the time the intro period ends, you'll be charged interest at the card's standard APR.

Use Virtual Credit Card Account Numbers When Shopping Online

If you're shopping online, your credit card information will likely be stored in the merchant's system, making it vulnerable to data breaches. To help protect yourself, consider using virtual credit card numbers, which are temporary numbers tied to your existing card account. Check with your card issuer to see if it offers this as a security option. If it does, you'll get a randomly generated card number, expiration date and security code that's tied to your real account. Use the information when checking out online.

Protect Your Purchases With Extended Warranties and Purchase Protection

Some credit cards offer purchase protection and extended warranty coverage on certain items. For example, if an item has a manufacturer's warranty, your card may cover it beyond the expiration date. And if an item is stolen or damaged, purchase protection may help you replace it.

Just keep in mind that coverage varies widely based on the card. If you plan to make a large purchase and you want an extended warranty—or you simply want to use the card with the best purchase protections—read over your card details to make the best choice.

Credit Card Don'ts for Holiday Spending

While there are benefits to using your credit card during the holidays, it's important to be cautious so you don't end up deep in debt or with damaged credit scores. Here are some examples of what not to do when making purchases this season.

Don't Overspend

Overspending throughout the holiday season doesn't just mean starting the new year saddled with debt. A higher credit utilization rate could lower your credit score, and any missed credit card payments could result in late fees and further credit damage.

If your card doesn't have a 0% intro APR promotion, you'll also owe interest on your credit card debt until the balance is repaid. In the meantime, you'll have less money for other financial goals or needs while you pay down your debt. Use your holiday budget and keep your financial goals in mind to help you stay on track.

Don't Forget to Pay Your Bill

Forgetting to make a credit card payment could be costly in several ways. Card issuers may charge late fees of up to $41, even if the payment is just a day late. And depending on the terms and conditions of your credit card, your issuer may charge a penalty APR if you haven't made your minimum payment within 60 days. This generally means you'll pay more interest on future purchases. And your credit scores will take a hit when your card issuer reports 30-day-late payments to the credit bureaus.

Don't Enter Credit Card Information Online From a Public Wi-Fi Network

Public Wi-Fi networks are risky places to complete payment transactions, or provide any personal information at all. These networks carry the risk that someone could be snooping to access your information without your knowledge.

If you have to shop while on a public network, consider using a virtual private network to encrypt your connection to the internet.

Monitor Your Credit During the Holidays

The holidays are a busy time, making it prime time for identity thieves to take advantage of unsuspecting victims. Monitor your credit regularly to make sure there's no strange activity going on.

If you find a purchase or other action on one of your credit card accounts that you don't recognize, you have the right to dispute it with the credit reporting agencies and freeze your credit to stop further fraud.

Experian's free credit monitoring tool can help you keep track of your FICO® Score and Experian credit report. You'll also get real-time alerts when changes are made to your credit report, so you'll know quickly if something is off.