Black Friday is still two weeks away, but that hasn’t stopped retailers from pulling out all the stops. Fortunately, there are few simple steps shoppers can take to protect their credit scores from taking a hit this holiday season. Here’s how to prepare for Black Friday:
Can Your Wallet Handle the Upcoming Haul?
The holiday shopping season seems to be starting sooner each year and retailer antics are leaving painfully little time for shoppers to prepare their finances for the impending assault on their wallets. Just as store doors have been opening for holiday shoppers earlier and earlier, retailers have been sneakily upping their Black Friday ad release dates a few days at a time – successfully building up anticipation for the country’s biggest shopping day of the year. In 2016, Target launched its Black Friday deals on November 11th. This year they’ve come out almost one week earlier (November 6th). But those aren’t the only tricks retailers have up their sleeves this holiday season. Many major retailers have already begun teasing shoppers with Black Friday previews and sneak peeks with prices being slashed on hot appliances, tech, and toys. Not only are these deals hard to resist, but they’re also drawing out the holiday shopping season to be even longer – meaning you might end up pulling out your wallet far more often than you did a few years ago. Of last year’s 67 million holiday shoppers, nearly a third of them admitted that they would not be able to pay off their debt from holiday-related purchases within five months. Pair this with the surging APRs of credit cards and you’ve got a recipe for a financial disaster. Your likelihood of getting a loan, being approved for a mortgage, or even a new job, could find themselves at risk if your finances aren’t insulated enough to absorb the shock of the impending holiday season.
(Non-Cliché) Tips for Handling Your Black Friday Spending
When it comes to preparing for holiday shopping, common suggestions involve increasing your income (i.e. a part-time job), paying down your existing debt, and setting a budget (yawn). Technically, those suggestions could work but with crunch-time of Black Friday nearly upon us, there are only so many things one can do to prepare last-minute. Sometimes, trying to “be responsible” just doesn’t cut it and you need outside help. You don’t have to worry about any money management lectures here, instead, BestCards has your cheat sheet to maintaining your credit score through the holiday season. Here are four painless ways to get your wallet ready for impact and prepare your credit score for Black Friday shopping (all without ever leaving your couch).
Ask for a credit limit increase
While doing this may not directly save you money, having more available credit to your name is always better. A credit limit increase will help your credit score feel less impact when those Black Friday payments hit and protect your precious credit utilization ratio (which makes up 30% of your credit score). Spending $1,000 will hurt the credit utilization ration of a $5,000 credit limit (20%) far more than it would a $7,500 limit (13%). You should only ask for a credit limit if (1) your credit score could handle the inquiry and (2) you’ve held your credit card with that issuer for at least six months. The ideal number of credit card inquiries is two or fewer (although, realistically, lenders still consider those with up to six to still be in good standing) and inquiries take two years to fall off your credit report. If you have any big financial plans coming up in the next two years – mortgage, car loan, etc. – you may want to hold off on this non-essential inquiry.
Take advantage of layaway
This seemingly antiquated shopping option is alive and well and could be the solution to buying your wallet a little more time to pay things off. If you’re looking for a short-term fix, layaway allows you to purchase items but only requires a percentage of the purchase price upfront. This is a great alternative to relying on credit cards if your current credit limit is already maxed out or close to it. The primary downside of this option is that you won’t be able to actually take the item home with you until it’s been fully paid off – not ideal if you were hoping to have a present wrapped in time. But if you’re not purchasing time-sensitive gifts, layaway is a great option for taking advantage of limited availability items or markdowns and paying for them later. Depending on the retailer, layaway will allow anywhere from 30 days to 12 weeks for shoppers to pay for their desired merchandise.
Get a 0% Intro APR card
Opening a credit card with an introductory 0% APR has the benefit of a credit limit increase with the added bonus of allowing for interest-free payments. These types of cards have always been praised for their ability to take on large purchases, and your Black Friday shopping spree is no exception. Your credit score may take an initial ding, but this option could save you hundreds of dollars in interest payments. These no-interest periods can range up to 18 months and depending on the card, you could very well earn bonuses on your purchases – cha-ching.
Get a balance transfer card
The next best thing to 0% APR, a balance transfer credit card allows you to consolidate your credit card debt while giving you extra breathing room for paying it off. This is a great option if you’d like to shop using your rewards credit cards (like the one card that offers 5% at department stores) and then later invoke the no interest perk once your transfer your balance to the new card. There are some compelling options out there, with cards offering 0-interest balance transfers for up to 21 months.
Be a Credit Savvy Black Friday Shopper
As you prepare for Black Friday weekend, it’s important to keep your long term financial goals in mind. Whether you prefer to browse Black Friday sales in-store or as online, using any sort of spend tracking app is a great way to prevent yourself from paying unnecessary credit card fees (despite the steep discounts that retailers dangle over consumers with their holiday sales, those savings could easily cost you if you end up paying out the nose in interest or commit long-term damage to your credit score). Be careful that their pursuit of a good deal doesn’t leave you financially stranded later down the road.