Beware of the lasting impact overspending this holiday season could have on your credit score, if you're not careful.
You knew it as soon as you saw your first red Starbucks coffee cup – the holiday shopping season had arrived, well in advance of Thanksgiving Day discounts and Black Friday doorbusters.
And since there's nothing like a peppermint mocha or a gingerbread latte to put you in a festive mood, it's easy to get caught up in holiday-shopping hoopla.
In fact, an annual survey conducted by global management company Accenture indicates that consumers expect to spend more on gift buying this year.
According to the survey:
- U.S. consumers plan to spend an average of $646 on gifts this year – 11% more than last year.
- 20% of consumers plan to spend more on gifts this year compared to 14% who planned to increase their holiday spending in 2012.
- Consumers are more likely to overspend their holiday budget this year (46%, compared to 34% in 2012).
While shoppers plan to spend more, they will also be more focused than ever on discounts and sales.
- 94% of shoppers said that discounts will be important to their purchasing decisions up from 84% in 2012.
- 63% plan to browse at a store then go online to find a better deal.
- 62% said it will take a discount of 30 percent or more to persuade them to make a purchase.
Take care of your credit score
Bargain hunting aside, as a college student with tuition to pay, you may be more sensitive than most consumers to the need to keep your holiday spending in check.
According to Saint Leo's Dr. Passard Dean, associate professor of accounting, there's another important reason to watch your wallet during the holidays.
Your credit score.
It's something Dr. Dean knows a lot about – he used to work at Equifax, one of the three main credit reporting agencies.
"Your credit score is so important in today's economy," he says. "It affects your ability to get a loan on a new car or to obtain a mortgage on a home, as well as the interest rate you have to pay. And if you already have student loans, then you need to be especially cognizant of how much more debt you incurring."
With that in mind, here are some do's and don'ts from Dr. Dean to help you keep your holiday spending under control and your credit score strong.
Holiday spending "Do's"
- Keep yourself at 50% of all of your available credit. Because credit bureaus look at all of your debt, moving debts around from one card to another doesn't help. So don't even go there.
- Stay on a budget. This is especially true if you have little to spend because every penny counts. Putting it on paper helps: use a simple Excel spreadsheet or one of the many apps available.
- Pay your bills on time. This is the single, most-important contributor to a good credit score. If you can't pay your bills on time, you're spending beyond your means.
Holiday spending "Don'ts"
- Don't go crazy. Keeping your balance low on your credit cards helps you pay off your bills at the end of each payment period. It also helps you avoid paying interest.
- Don't fall for credit card "deals." This includes introductory offers such as "no interest for six months." All these incentives do is entice you to spend more money.
- Don't accept increases on your credit card spending limit. And certainly don't request an increase. Acquiring more credit cards or increasing your spending limit only increases your potential debt, which hurts your credit score.
Dr. Dean's final piece of year-round advice is to get a copy of your credit report every six months, or at least once a year. Being vigilant can ensure nothing appears that can hurt your score.
Do you plan on spending more this year on holiday shopping?
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