The year is winding down, and we are now in the midst of this year’s holiday shopping season. While we are still in the throes of the global economic recession, you and millions of other people will venture out to crowded department stores, malls, and boutiques in search of the perfect gifts for their friends and family.
Since most people know they will be spending money on gifts, the holiday season is one of the best times to take advantage of benefits offered by credit card issuers such as cash back, rewards points, and no interest on purchases. Keep in mind, if you were to make these purchases using cash, you would be squandering the potential benefits gained by using a credit card.
However, the holiday spirit and temptation to buy expensive gifts for friends and family members can end up causing shoppers to rack up significant amounts of credit card debt, simply due to failure to take adequate precautions when using their credit card.
Here is a list of simple questions that you should ask yourself when using a credit card this holiday season to minimize problems and maximize benefits:
Am I already carrying credit card debt? If the answer to this question is yes, then you should probably stay away from using your credit card to make holiday purchases this year. While it’s easy to get carried away with wanting to make your friends and family happy with nice gifts, your financial security is more important, so scale down those gift purchases to something more affordable.
Do I know my credit limit? Knowing your credit limit is of utmost importance. This is because if you exceed your credit limit without knowing, you run a good chance of the credit card company charging you penalty fees, and harming your credit score. Do not spend more than your credit limit allows for.
Do I know my interest rate on purchases? If you plan on carrying a balance whatsoever, you’d better know your interest rate, or you risk digging yourself into debt. If you have a high interest rate and you’re planning to use your credit card for holiday purchases, you should make sure to pay the balance off in full at the end of the month.
Do I have a budget in mind? The easiest way to stay within your means this holiday shopping season is to create a list of gifts that you plan on buying for your friends and family including dollar amounts, and then adhere to that budget by all means.
Can I use my existing credit card points to buy gifts? One of the main draws of a credit card is getting rewards points from your purchases that you can redeem later for items such as electronics, flights, hotel stays, and more. If you have a lot of points saved up from using your credit card throughout the year, you can use these points to buy gifts instead of having to use actual money. This can save you a lot. If you do not yet have a credit card that offers rewards points, you can compare credit cards to find one that will benefit you the most.
What do I say when a store offers me a store-branded credit card? No. That’s a simple answer. You want to make sure you stay away from retailer credit cards at all times. This is because their interest rates are extremely high, and they offer poor long-term benefits. In addition, applying up for too many credit cards in a short period of time has the potential to harm your credit score.
With the above questions (and answers) in mind, you are now ready to get out there and shop for your loved ones, while at the same time ensuring your financial security.