Take special care of your credit during the festive season

January 11th 2013

For most people, shopping is an integral part of the festive season. In a recent survey, it has been found that nearly 140 million people have shopped to their hearts’ extent on Black Friday in the previous year. However, with debates surrounding the debit card fees, most people may turn toward the credit cards for shopping during the festive season. Nevertheless, too much usage of credit cards can put credit health into risk. Glance through the article to know how you can take special care of your credit health during the festive season.

Safe guard your credit during the holiday season

If you're planning to use credit cards for purchasing various items during the festive season, then chalk out a financial plan right now. This will help you steer clear of credit card debt, and protect your credit simultaneously. You can begin your New Year on a good financial start.

Here are the 4 tips to avoid credit card debt hangover and shield your credit at the same time.

1. Know what your credit score is: Have a look at your credit score prior to joining the shopping bandwagon in the holiday season. Your current credit score can tell you how much purchase you should make through the credit cards. Apart from that, if you're thinking to obtain a home loan or a credit card during the holiday season, then your score can instigate you to remove the negative items from the credit report. A slight difference between the credit score can make a big difference to the interest rates charged on the loan.

Pull your credit report and find out your present credit score. Check the different sections of the credit report and know about the areas where you need to work on.

2. Spot the suspicious items: The identity theft rate in the country is quite high. The identity thieves look out for fresh victims during the festive season. So, take special measures during the festive season to avoid being a victim of identity theft. Log in to your credit card account and check your online statements. Find out if there has been any unusual activity in the past few days. If you think that any unauthorized financial transaction has taken place, then call the credit card company and report the matter to them.

3. Stay within the credit limit: You may feel like purchasing all the items from the store during the holiday season. You can purchase the items by just charging your credit cards. However, unwise use of credit cards can jeopardize your credit score. Once you cross the credit limit, your credit score takes a toll. Your credit score will drop by several points and the lenders will start looking at you as a financial instable person.

If you want to use your credit cards for making the purchases, then start reducing the outstanding balances from now onwards. This will help you in creating a space for the holiday purchases. You can use a calculator to compute your credit-utilization ratio. Keep in mind that this ratio constitutes 35% of your score. If you find that your credit score is hovering around 30% mark, then refrain from using the plastic card for a few days. Pay off the outstanding balance first. If possible, use debit cards for shopping purpose.

4. Set up spending limit alert: Contact your bank and set up a spending limit on your plastic cards. This will help you to not stray away from your holiday budget. Set up spending limit alert through the bank. You'll get an email as soon as you're at the threshold of the spending limit. Banks/credit card companies will not permit you to charge your credit cards after reaching the spending limit.

One effective way to avoid reaching the spending limit is to use a prepaid or debit card for purchasing few items. The best part of these cards is that you can't overspend. This way, you can stay within your holiday spending budget.

Finally, you can secure a new credit card with 0% APR during the festive season. You can use this card for your holiday shopping. You can pay off the balance after making your purchases and save on the interests. Keep in mind that the 0% interest rate will be waived off if you miss payments. So, try to avoid missing any payments. Moreover, make sure you pay off the balance within the introductory period. The interest rate may become double after that period.

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