MW Try this 30-second trick to keep your holiday spending from wrecking your credit score
By Genna Contino
The hack could've prevented this spender from racking up almost $30,000 in credit-card debt
More consumers plan on paying for their shopping with a credit card this holiday season, but it's easy to fall into unmanageable debt without guardrails in place to monitor your spending.
For one of financial adviser Marc Butler's clients, trouble didn't arrive with a single bad decision - it crept in quietly.
The client earns $245,000 a year and relied almost entirely on his credit card, rarely tracking his spending. Over 18 months, small increases in spending on dining, travel and online shopping snowballed into nearly $30,000 in debt.
"What felt like 'normal' actually doubled his discretionary spending," said Butler, a financial planner at Pennsylvania-based Anthony Petsis & Associates. "Financial drift doesn't happen in one big moment - it happens quietly, if you aren't paying attention."
To combat that potentially dangerous "drift," there's a simple step that anyone can take: Set up notifications through your bank or credit-card app that tell you every time your balance reaches a certain amount. Butler worked with the client to set up category-level alerts that notified him when he spent over a certain amount on things like dining or travel, ultimately helping him get back on track.
Read more: Doing your holiday shopping with a credit card? Use these 6 tips to preserve your credit score - and your sanity.
This is a good time of year to try out this easy move. Shoppers are expected to rely more heavily on credit cards for holiday shopping this year, with 42% saying it is their preferred payment method in a TransUnion (TRU) consumer study, up from 38% last year. After last year's holiday season, individual cardholders with unpaid balances had an average of $7,321 in debt in the first quarter of 2025, LendingTree (TREE) data showed, up 5.8% from $6,921 in the same time frame last year.
It's fine to fund your gift-giving budget with a credit card, but make sure you have a plan to pay it off. A big increase to your balance can raise your credit-utilization rate, or the ratio of debt to available credit. This rate is factored into your credit score - meaning if you don't pay off a high balance right away, your score can decrease.
Of those who plan to use a credit card for holiday spending this year, 52% don't expect to pay off the full holiday debt when the bill arrives, according to a survey from the Association of International Certified Professional Accountants, with 17% saying it will take more than six months to pay it off.
Read more: How to avoid surprise tariff bills while holiday shopping
Using a credit card creates distance between the decision to spend and the realization of what that spending means, making it easy to rack up debt if you don't track your spending or have tools in place to monitor it. That's why setting up spending notifications in your credit-card app can help you avoid using up too much of your credit limit, saving your credit score and preventing you from falling into a debt spiral.
"The first habit is a few practical alerts: monthly category thresholds, large-purchase notifications and a monthly spending alert at a level that matches a household's normal pattern," said Trent Grzegorczyk, a Florida-based wealth manager at Savvy Advisors. "These nudges create awareness, not restriction."
How to set up notifications to best manage your spending
Most major credit-card issuers let you set up spending notifications for amounts that are lower than the card's overall credit limit through the app or website. Capital One $(COF)$, for example, lets you set push, text and email alerts once your balance passes a certain amount you select. You can also choose to set notifications if your available credit goes below a certain amount.
Your spending notifications should reflect your income, budget and credit limit. A common rule of thumb is to keep your credit-utilization ratio below 30% - meaning your balance stays under 30% of your available credit. The lower that number, the better, since reducing credit utilization can improve your credit score.
Read more: How to tariff-proof your holiday shopping list
For example, if you primarily use one card with a $10,000 credit limit, setting a notification to alert you when your balance reaches $3,000 signals that you've hit the 30% threshold and may want to curb spending.
Some card issuers' apps and websites also offer the option to view regular spending summaries. Chase $(JPM)$, for instance, allows you to see your monthly spending broken down by categories such as groceries, dining, travel and bills.
Butler said viewing these summaries was an effective step for his client as he worked toward controlling his spending. "It reconnected him with his own financial behavior," Butler said. "Simple, consistent habits create the biggest long-term change."
Why it's so easy to rack up credit-card debt
Using a credit card for the majority of day-to-day spending can be a good strategy for building credit and getting rewards points, but it's easy for that spending to become unwieldy if you don't check your statements on a regular basis.
The easiest way to rack up debt, according to Pennsylvania-based certified financial planner Patrick Sabol, is only paying the minimum balance while still using the card to spend beyond what you can afford.
Read more: 'We fear people will end up in financial trouble.' Americans will spend a record $20 billion via buy-now-pay-later during the holidays.
"If you blindly spend and say yes to everything, credit-card spending can quickly get out of hand," said Sabol, a senior lead planner at Facet Wealth.
It can be especially easy to slip into these patterns for new retirees once their regular paychecks stop, Grzegorczyk said. Many assume they'll spend less in retirement, but they tend to spend more.
That's not due to extravagance, but a new, unfamiliar daily rhythm, he noted.
"Retirees have more unstructured hours and more opportunities to say yes - lunch with a friend, an extra coffee, a spontaneous weekend visit with the grandkids," Grzegorczyk said. "Nothing feels unusual, yet when you remove the steady cadence of earned income, these added moments show up in the numbers faster than expected."
Do you have questions about credit cards that you would like to see covered in MarketWatch? We would like to hear from readers. You can write to us at readerstories@marketwatch.com. A reporter may be in touch to learn more. MarketWatch will not attribute your answers to you by name without your permission.
-Genna Contino
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(END) Dow Jones Newswires
December 12, 2025 15:00 ET (20:00 GMT)
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