Racking up credit card debt to pay for Christmas presents and getting new credit cards to get savings on department store purchases can really ding your credit.
Donna Perkins, owner of Kansas City Credit Services, offered some tips to keep you financially healthy at the holidays.
She says as tempting as offers are to open a new account that those extra credit cards can hurt your FICO score, which is the mechanism used to determine your credit risk and to determine interest rates on loans for houses and other big-ticket items. A credit check for a new card can lower your credit score by up to 20 points.
“You want to stay with your Visas and Master Cards,” she said. “I’m not a real (promoter) of credit cards anyhow, but stay with your cards that can be used anywhere.”
Actually opening a new account can cause a 50 to 60-point reduction in your credit score.
A recent survey found that one in four can sink into debt while paying for Christmas presents.
Perkins advises having a written list of items you plan to purchase and sticking with it carefully. She said avoiding scanning every aisle in a story because you will be tempted to make an impulse purchase.
Start saving early so you can pay via cash or check to avoid incurring credit card debt. She said it’s way too easy to overspend when swiping a credit or debit card.
Perkins suggests spreading purchases over two to three cards rather than a single card. That helps keep balances down and works to help your FICO score.
“The ideal way to use a credit card is not to put anymore on that card then you can pay off when the bill comes,” she said. “Keep those credit card balances low. You now get dinged pointed at 25 percent of what you can charge, 50 percent when you go over the limit and the biggest ding to your credit history comes when you go over that limit.”
If you can’t pay off every month, then your balances should never exceed what you could afford to pay off in two to three months if necessary.
Copyright 2013 KCTV (Meredith Corp.) All rights reserved.
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Credit card spending at holidays can hurt your financial fut – KCTV5 – KCTV Kansas City
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