Effectively manage your credit this holiday season

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If spending and the holiday season go hand-in-hand, so, too, does January and the financial hangover that results from having spent so much in November and December. Many consumers find themselves in considerable debt come the new year, having decided to put many of their holiday purchases on plastic when the season was in full swing.

But just because the holidays are a season of spending does not mean the first months of the new year need to be an exercise in extricating yourself from debt. The following are a few ways shoppers can effectively manage their credit this holiday season.

Don’t use credit just to earn bonuses. One way to fall into significant debt is to justify your use of credit cards as a great way to earn miles, points or cash-back bonuses. While such rewards can be appealing, if you’re afraid that you will overspend this holiday season if you put everything on plastic, then don’t do so just so you can earn bonuses.

Credit cards should only be used when you have enough money to pay off a balance in its entirety before you incur any interest charges. Those rewards might be tempting, but they’re not as valuable if you overspend and end up paying substantial interest charges.

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Avoid retailer credit cards. Retailer credit cards also entice shoppers with deals. When purchasing items in-store, customers often are asked if they would like to earn a percentage off of their purchase by signing up for a retailer credit card. Such discounts may fall anywhere between 10 and 20 percent, a deal that many men and women may find too tempting to resist.

However, retailer credit cards often come with much higher interest rates than standard credit cards. Unless you know you can pay off the balance immediately, decline the offer to sign up for a retailer credit card, opting instead to pay for your items with cash or a preexisting card that carries a much lower interest rate.

Use only one card. Using multiple cards when making holiday purchases is a great way to lose track of how much you have spent. Even though the Internet makes it easy to check balances on all of your cards multiple times per day, managing credit is still easier if you only need to log in to a single account to monitor your holiday spending. Make a daily effort to monitor that spending, as it’s free to view your balance online and such monitoring can greatly reduce the likelihood that you will overspend.

Don’t exceed your credit limit. One of the biggest yet most preventable mistakes consumers make come the holiday season is exceeding their credit limits. Exceeding your credit limit not only means you will have a rough month of January when the bills come due, but such a mistake also has a more long-term effect, as your credit score suffers anytime you exceed your limit.

Know your interest rates. Though it’s best to only use a credit card when you know you can repay the balance in full when the bill arrives, some consumers simply must carry a balance. In such instances, know the interest rate held by a particular card before you swipe that card to make a purchase.

Some cards hold variable interest rates, which means the interest charged back in June may be far lower than the interest you will be charged in January. Before using any of your credit cards, determine which one holds the lowest interest rate and use that one when making holiday purchases.

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