Best Credit Card Practices During the Holiday Season
The holiday season brings the joy of giving and receiving but it also brings to most people additional debt. Many people use their credit cards to purchase gifts for loved ones. They want the holidays to be fun and full of gifts. But using a credit card to pay for things you can’t afford will only bring delayed guilt once the joy of the holidays has passed and the credit card bills arrive.
If you are already in debt, using a credit card to fund your gift purchases can be a really bad idea. Using a credit card can make it easy to overspend and rack up the after-holiday debt. However, if you shop wisely when making purchases, you can find some benefits to using your credit card during your holiday shopping. Here are some of the best credit card practices for the holiday season.
Make a Budget and Stick to It
First you will want to establish a holiday budget and stick to it. The primary reason people overspend on credit cards is that it’s too easy to use them and they don’t have a clear idea of what they can afford to spend. Think about each purchase you need to make, determine a budget, and then stick to it regardless of your credit card limit.
Use Your Rewards for Gifts
One way that your credit card can benefit you when doing your holiday shopping is by using your cash back rewards earned all year long or cashing in your rewards points for gifts for friends and family. If you have a credit card that is part of a rewards program, you should check with the company during the holiday to see if there are special promotions going on. Some cards offer greater rewards points or higher cash back rewards during November and December. This means that you can buy some of your gifts early, accumulate more cash back or points and then use the cash back or points to purchase additional presents on your list.
Be Wary of Store Credit Card Offers
Another thing to remember during your holiday shopping is that you don’t want to fall for offers of in-store credit cards. The offers always sound good, offering deals like 10% to 15% off your total purchase made that day. However, if you do the math, it doesn’t always make sense. For instance, if you spend $100 and you are getting a 10% discount on your purchase, you saved $10. But most store credit cards have extremely high interest rates, usually over 20%. You save 10% but you are charged 20% or more on the purchase. If you don’t pay it off you will spend more in interest fees than you saved on your purchase. So make sure you think through any offers before taking advantage of them. And don’t forget, your credit score is also affected by how much open credit you have, how many new credit cards you have, and how many times inquiries are made to your credit report. So opening this new store credit that may cost you more than it saves can also have a dramatic affect on your credit score.
Observe the Best Credit Card Practices if You Must Use Your Card
Credit cards have their place and their advantages during your holiday shopping if you take heed of the best credit card practices listed above. Most importantly, as with all credit card usage, you need to make sure you think through your use of the card and ensure that you are using the best way to pay for your purchases. Establishing a budget is the key to not overspending on credit cards so make sure you create a budget and stick to it and you will not be hit hard after the holidays with debt.
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Tags: Credit Cards, holidays
January 5th, 2012 at 3:45 AM
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It’s vital to learn everything you can about financial management and related concepts to keep yourself in a solid position during 2012 – above all, avoid bankruptcy whenever you can!