Small Christmas present

Holiday shopping is on the rise. Last year, over $5 billion was spent on Black Friday, a record. Overall, holiday spending in 2016 increased nearly 4 percent compared to 2015, a considerable increase considering that billions of dollars are normally spent during the holiday season. In fact, one third of retail sales in the United States occur during the holiday season.

On a macro level, holiday shopping is big business. On an individual level, shopping during the holidays can lead to financial mishaps if not properly managed. A recent survey reported in MarketWatch found that Americans with debt (nearly 75 percent of Americans die with debt) owe roughly $1,000 as a result of holiday shopping.

This article is designed to help readers understand how to make healthy financial decisions that will keep credit in check during the holiday season spending spree. 

  1. Use a credit monitoring platform

    There are three major credit bureaus that constantly monitor the financial risk associated with hundreds of millions of Americans. Equifax, TransUnion and Experian issue credit reports to potential lenders, employers, and government agencies for various purposes. These reports are often the fact that determines if you qualify for a loan, and what interest rates are associated with the loan should you qualify.

    Those with better credit (300 is the low end and 850 is the high end) are able to secure more favorable terms associated with personal loans. People with better credit may also find it easier to secure a job, as some states allow employers to conduct credit checks as part of the due diligence process.

    Readers should consider using a free credit monitoring tool like Credit Karma or Credit Wise to check credit scores on a regular basis. Legislation passed by Congress after the 2008 financial crisis mandates that all Americans are entitled to receiving a full credit report annually from each credit bureau upon request. Readers should request full reports before submitting a loan application, in order to ensure that the reported financial history is accurately represented.

  2. Consider a balance transfer credit card
    For those who already have credit card debt, a balance transfer credit card can be a good way to get your debt under control. If your current credit card has a high interest rate, it may be difficult to actually pay down the principle. Transferring credit card debt to a new card with a low interest rate will make it considerably easier for you to pay down the principle of your credit card debt.

    Note that balance transfer credit cards often offer low introductory credit card rates, that increase after the introductory period. That means it is best to pay down as much of the credit card debt during the introductory period as possible in order to avoid the negative effects of compounding interest.

  3. Follow the 30 / 50 / 20 rule to keep out of trouble
    Managing your credit effectively means managing your money well. A good rule of thumb to keep expenses in check is the 30 / 50 / 20 rule. This rule posits that 30 percent of your income should be spent on discretionary spending, money spent on holiday gifts will come from this portion. Fifty percent of income should be spent on essential living expenses. Things like rent, car payments, and utilities fall into this category. The remaining 20 percent should go straight into a savings or investment account.

    Following this rule will make it much more difficult for you to find yourself in a position with high credit card debt as a result of excessive holiday spending. Once you have spent 30 percent of your income on discretionary items, you’ll simply need to resort to homemade gifts rather then turning to your trusty credit card.

  4. Know the difference between good credit and bad credit
    There is a notable difference between good and bad credit. Good credit often does not negatively impact your credit score, and can in fact improve your financial opportunities in the long run. Bad credit on the other hand can lower your credit score, and can lead to unpleasant financial situations.

    Examples of good credit include some types of student loans, depending on the lending terms, and home loans. Examples of bad credit include credit card debt or a pay day loan. Readers should try to avoid incurring bad debt, and should feel comfortable assuming good debt, assuming the debt is paid back on time.


There is no better feeling than giving a thoughtful gift to a loved one, and this holiday season will surely provide a number of opportunities for exactly that. However, readers should remember that gift giving should not be done at the expense of credit health.

To manage your credit effectively, be sure to track your credit score using a free tool. Consider a balance transfer credit card should the interest rate associated with an existing leveraged credit card be too great.

In order to prevent over spending, knowing the difference between good and bad credit, and following the 30/50/20 rule are good strategies to remain financially independent.

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