Monday, November 23, 2009

Protecting Your Credit During the Holidays


By Nan Jensen, Family and Consumer Sciences

As you gear up for Black Friday, Cyber Monday and the holiday shopping season, we’d like to offer you some tips on how you can use your credit cards wisely to keep your spending in check.

Set up a holiday budget. Without a predetermined spending limit, you can easily max out your credit card or charge more than you can afford. Before you hit the mall or the computer, figure out how much you can reasonably spend and keep that amount in mind as you shop. Create a list of all the purchases you will make that are specific to the holidays. Think about who you will be buying for, contributions to holiday parties at work or your child’s school and any extra entertaining you might do at home. You may tend to eat out more when you are shopping, or because you are busier around the holidays, so add those expenditures to your list. If you make charitable contributions around the holidays, add those to your list.

Make a list of people you need to buy things for. Try to think of what you have in mind for each person. If it is not a specific item, then you should think in terms of specific dollar limits. Without setting this in advance, it can be easy to overspend.

Beware of store credit cards that “save you money” on that purchase. Many stores typically offer enticing offers during the holidays by encouraging you to get a store card and save an extra 10% or more on purchases that day. This works only if you pay the balance charged back in a reasonable time frame. With the high interest rates (20%or more) you typically pay on the balances of those cards, that $50 savings on a $500 purchase may not be savings at all if you have to spread the payments out over time.

Don’t max out your credit cards. If you max out your credit card during holiday shopping, this can impact your credit score. According to Fair Isaac, a credit scoring program widely used by credit bureaus, about one-third of your score depends upon your "utilization ratio," or how much of your available credit you actually use. Experts recommend that you keep your balance below 30%, or $300 for every $1000 of available credit.

Keep track of your holiday credit card spending. What good is a budget if you're not keeping up with it? Check your receipts to make sure you're not spending too much.

Don’t fall for the “skip a payment” offer from your credit card company. Credit card issuers commonly make this offer around the holiday season. It can become a problem if you carry a balance on your card. The offer is designed to entice you to skip your payment but the interest would be applied to the full amount for that month. Skipping payments can get very expensive very quickly if your balance and interest rates are high.

Plan to pay off anything you charge on the holidays within 1-2 months at the longest. Considering the holidays come every year, you will never be able to get ahead if you are still paying off debt from last year when you begin holiday spending for this year.

Save those receipts. Make sure to keep them together in one location, as you may need them for returns and exchanges. Check credit and debit card sales and return receipts against your monthly bills and statements. Report any problems to the credit card issuer right away.

Keep an eye on your wallet. Don’t flash any cash you might be carrying. Watch your credit or debit cards during transactions, and get them back as quickly as possible. If your cards are lost or stolen, report the loss or theft immediately to the card issuers. To report your credit card lost or stolen, call the customer service number on your billing statement.

Make a New Year’s resolution. To avoid credit card use, begin setting aside a little money from each paycheck in January in a special account reserved for holiday expenses. Saving just $10 a week will give you a nearly $500 head start when December rolls around. Check to see if your bank or credit union offers special holiday savings accounts, or consider a direct deposit from your paycheck.

Here is a holiday budget sheet to get you started.


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Company and product listings do not represent endorsement by either: Pinellas County Extension, Pinellas County or the University of Florida / Institute of Food and Agricultural Sciences.