Just as the time of year determines when the sun rises and sets, it also portends how much you'll spend on your credit cards. Charging, it seems, is a seasonal pastime.
Consumers accelerate their charging the most in November and December and pull back mightily in the first three months of the new year. Credit card spending then steadily rises until it hits another burst in August and then wanes for the next two months, according to a Bankrate analysis of Federal Reserve data.
Knowing when and why credit card spending increases could help consumers smooth out all that charging, so they can avoid rolling balances and low credit scores.
"Credit usage is a living, breathing thing that reacts to what is happening in the environment at a particular time," says Ezra Becker, vice president of research and consulting at credit bureau TransUnion.
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Dissecting credit card spending
A Bankrate analysis of Federal Reserve data since 2004 found that credit card spending increases on average by 1.09% in November over October and then by 2.56% in December over November. Those months mark the most rapid month-over-month growth in an average year.
January, February and March show the largest month-over-month declines in spending, respectively, according to the analysis. By April, consumers slowly charge more than the month before and, in August, consumers ramp up their charging by 0.76%, the third largest month-over-month rise in average credit card spending after November and December.
Consumers slack off in September and October before ramping up for the holidays, according to the analysis.
External forces on charging
It should come as no surprise that the uptick in charging in November and December is due to holiday spending. But what about the ups and downs that occur in the other months of the year?
"January and February are pretty much your valleys for the year, minus those folks who fall too hard for Valentine's Day," says John Ulzheimer, credit expert at Credit Sesame. "It's hard to maintain the same level of spending you did over the holidays."
Spring and early summer bring a rise in spending as people plan summer trips, buy airline tickets and spend more on dining, gas and entertainment during vacation, Ulzheimer says. Spring and summer bring celebrations as well.
"Another season I see from time to time is the wedding season that happens in the late spring and early summer," says Rod Griffin, director of public education at credit bureau Experian. "There's more of that going on than in any other time of the year."
In August, charging spikes as parents spend money on clothes and supplies for their children before the school year begins, Becker says.
Understanding the highs and lows of seasonal credit card spending can help consumers plan ahead to save money on interest charges and avoid higher interest rates.
Consumers reduce spending in the new year as they try to pay off the balances they racked up during the holidays. Many end up rolling part of their holiday debt over those three months and paying interest on it. That can become a bigger problem if they run into an unexpected expense during those traditionally low spending periods.
"You don't plan for things like a roof leaking or a car breaking down, which can turn a valley into a peak or a peak into an even higher peak," Ulzheimer says.
The best way to avoid paying interest is simply to budget for foreseeable peaks in spending, such as holiday shopping or back-to-school shopping, so you have enough money saved up to pay off the credit card balance when it comes due. For those unexpected expenses that can throw off the seasonal charging, keep some emergency savings to offset the expense.
Having a balance that yo-yos with the seasons also can affect your card's interest rate or credit limit if the higher balance affects your credit score. Issuers monitor their cardholder's score, and if it falls too much, they may take an adverse action to compensate for your added risk.
Higher balances can increase your utilization rate -- the percentage of available credit you use -- especially if you have few cards with low limits. That rate is a key factor in calculating your credit score. A lower credit score also affects the terms of any other credit you seek.
That means if you binge spend in December, you may want to wait until April, after your balances go down, to buy that new house and get the best mortgage rate.
"So how do you normalize your spending so you don't have peaks and valleys? It's nearly impossible to do," Ulzheimer says. "But, it helps to be aware of it so you can plan."
Copyright 2014, Bankrate Inc.