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Falling into the trap of overspending on
credit cards
during the holiday season is never a good thing as
far as your wallet is concerned, but wise spending
with credit during your holiday shopping can be
really beneficial.
If you already have excessive credit card
debt, using credit to make your holiday gift
purchases is likely not in your best interest. On
the other hand, if you’ve been careful with your
spending and you want to use credit cards for your
purchases- here is how you can benefit most from
using credit cards this season.
Determine Your Holiday Budget: And Stick to it
Like a Melted Candy Cane!
The reason credit cards have gotten a “bad name”
is because they are misused. People get carried
away with the power of accessible cash, and
sometimes forget it’s money that has to be paid
back- or at least they aren’t thinking about how
much they’ll pay for each purchase after the
interest has been accounted for!
Determine how much money you can afford to spend
on your holiday gift purchases. You want to be
able to comfortably pay back the money within a
month or two of charging it to your credit card,
to keep your interest rates
down and to be sure you don’t end up with a costly
debt that lingers for years.
Use a Cash Back or Rewards Credit Card
One of the best ways to benefit from holiday
shopping with credit cards is to use a cash back
or rewards credit card. The holidays are typically
a time when there is reason to spend more money in
a short period of time, and far more than you
normally would, which helps you earn more rewards
on this type of credit card. Rewards credit cards
work by giving back a percentage of your sales as
a credit on your statement, or in terms of points
that can be used to redeem merchandise, discounted
items, airline tickets, hotel discounts or rental
cars.
During the holiday season, many credit card
companies release special cards with bonus rewards programs.
For example, many cards offer higher cash back
percentages during the months of November and
December- or they may offer double cash back
rewards for the first 5 months upon opening your
account. These are perfect cards to make the best
out of your holiday shopping! It’s like saving
money on every purchase you make, without having
to deal with sales advertisements or coupons.
Avoid Peppy Store Clerks Who Offer Store Credit
Cards
The holiday season is the perfect time for store
cashiers to step up their in-store credit
promotions! They’ll offer you 10-15% off “today’s
purchase” when you open a store credit card to
make the purchase. That sounds great, right?
Saving an instant 15% on that day’s purchase.
Unfortunately, almost all department store credit
cards feature extremely high interest rates. While
you may save 15% on your $100 purchase, the
interest you’ll be charged could be as high as
25%- so if you don’t pay the bill off in it’s
entirely the moment it arrives in your mailbox,
you end up spending over the 15% savings in
interest fees! When you are offered a discount for
opening a store credit card, ask what the interest
rate is. If it’s higher than the discount, just
skip it and use your rewards credit card or pay
using cash- that way you know you’ve saved the
high interest, as well as an inquiry to your
credit report
and an additional line of credit
that can lower your credit score
(even if you make all your payments on time!)
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