The smarter way to use credit during the holidays

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During the holiday season—think Black Friday through New Year’s—it’s easy to go into auto-pilot and put a bit too much strain on your wallet. Whether it’s shopping for loved ones, shelling out for new winter gear, or taking a trip over the holiday break, ‘tis the season for enjoying ourselves without perhaps being the most financially responsible.

We’re not trying to be a Grinch and ruin the festive cheer. The trick is to not let seasonal spending give you a debt hangover once all the merrymaking is over. 

Here’s a holiday game plan for both avoiding new debt and paying off existing debt that can position you for a better financial future into the New Year and beyond. 

First, can you avoid taking on debt?

Putting savings away throughout the year is always a sound financial decision. In that same vein, having a designated holiday fund ready to go before Black Friday can help you avoid holiday debt altogether. Need some help reaching your savings goals faster? A high yield Varo Savings Account offers no fees and easy auto-saving tools that can help grow your money.

Let’s say you didn’t get your cash-only game plan together until the holidays are already here—don’t worry. Look at it as the perfect opportunity to restart your financial plan for 2023. 

Here’s a tip—an easy way to squirrel away hundreds each year is with automatic savings tools like Save Your Change, which enables you to sweep some money into your Varo Savings Account when you make purchases or transfers out of your Varo Bank Account. It’ll round up to the nearest dollar on eligible transactions.

Outside of taking advantage of the various options for year-round saving, think about how you can still celebrate the season while cutting back on unnecessary holiday expenses. If you still need to use credit, that’s ok—here’s how to determine the most advantageous way to do it.

Be smart about it

More than 70% of people said they used at least one credit card to make holiday purchases last year, according to a recent Varo survey¹. More than 50% of people said it would take them longer than a month to pay it off.

So, if you’re planning to use credit this holiday season, using the right card and understanding your card’s terms can make a big difference in your overall cost.

Seize the opportunity to build credit

Holiday spending can actually provide an opportunity to build your credit with every purchase. Look at it this way—every time you make an on-time payment, you’re building your credit history. A Varo Believe Credit Card offers no minimum security deposit, no annual fee nor interest, and no hard credit check to apply².

Consider a lower-rate personal loan

If you know you’ll need to borrow money and you have good credit, you may qualify for a personal loan or line of credit that has a much lower interest rate than credit cards or store cards.

Taking out a loan can still be more expensive than a new credit card with a promotional rate. However, it might make more sense if you want the accountability of having a fixed-term loan with pre-set monthly payments. It may also be a good opportunity if you need funds beyond the holiday spending season.

Time your credit card purchases

If you’ve been paying your credit card bill in full each month and your card has a grace period, you’ll likely have around 51 days between the start of your statement period and the bill’s due date.

You may be able to time your holiday purchases with the beginning of a statement period to give yourself over 7 weeks to pay. There are generally 4 paydays during that period (if you’re paid every other week), meaning you can make partial payments on your card to lower or pay off the balance before your credit card bill is due.

Have a plan for paying off the debt

If you expect to take on a little debt this holiday season, create a plan for how and when you’ll pay it off. To stay on track, you can time your automatic credit card or loan payments to coincide with paydays, or make manual payments at those points.

To make sure you have the funds available to make those payments, consider what extra expenses you can cut back on in January to free up room in your budget for bigger credit card payments. Also, think about how you can align your New Year’s resolutions with your money-saving goals.

Small, simple changes like cooking instead of ordering, canceling automatic subscriptions and memberships, and limiting online shopping after the holidays can go a long way towards starting the New Year on a high note when it comes to financial responsibility. 

^{1 2017 survey for Varo conducted by Propeller Insights of 1,000 U.S. adults}

^{2 To be eligible to apply for the Varo Believe Card, you need to have received Incoming Deposits of $200 or more in the past 31 days to your Varo Bank Account and/or Savings Account. Incoming Deposits include any deposit into your Varo Bank Account and/or Savings Account from any source outside of Varo, Varo to Anyone transfers between Varo customers, and final dispute credits.}

^{Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.}