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12 Naughty and Nice Tips for Holiday Credit Card Spending

How to Avoid Holiday Credit Card Debt

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After you're done making your Christmas list and checking it twice, you have to decide how to fund for holiday spending. Here are some tips for using your credit card this holiday season.

Naughty: Open up new credit cards to make purchases.

Nice: If you must use credit, use the credit cards you have. Inquiries that are made when you apply for new credit cards hurt your credit. Plus, the extra debt won't be worth it next June when you're still paying it off.

Naughty: Max out your credit cards.

Nice: Keep your credit card balances below 30% of your credit limit. Your credit utilization - how high your credit card balances are compared to your credit limit - is 30% of your credit score. The higher your credit card balances, the lower your credit score.

Naughty: Take a stack of credit cards when you shop.

Nice: Take the one or two credit cards you're going to use. First, you might have too many credit cards. You shouldn't take them all with you because the risk of credit card theft is higher during the holidays. The more credit cards you have with you, the more that can be stolen.

Naughty: Spend more since you're using credit.

Nice: Set a predetermined spending limit and stick to it. Rather than swiping your credit card to your heart's content, decide how much you can afford to charge and use that number as your guide. You'll have less debt to worry about paying in the new year.

Naughty: Use credit cards because you don't have enough cash.

Nice: Buy inexpensive gifts. Despite what advertisers want you to think, you don't have to shop until your wallet drops to have a good time during the holidays. Look for inexpensive gifts that your family and friends would love. Check out these lists for great gift ideas that you can afford.

Naughty: Take the next six months to pay off your balances.

Nice: Pay your balances in full in January. Paying your balance over several months - or worse, years - means the gifts end up costing more than what they would have if you'd just paid cash. You'll save money in interest charges if you pay your balance in full when you get your first statement after the holidays. That's the great part about setting a budget and charging only what you can afford.

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