When it comes to protecting yourself and credit cards we typically only consider identity theft being an issue. This is not the case, well not the only case. Jason Steele of Credit.com highlights the effects that using credit cards may hurt your finances in the article below and how to avoid the hole that people often dig themselves into.
As another hectic holiday shopping season approaches, perhaps the biggest differences between this year and years past are that some retailers are scaling back their Black Friday events, and that shoppers may be inserting their smart-chip-equipped credit cards into a terminal, rather than swiping an old magnetic stripe. But beyond the mechanics of using credit cards with this newer smart chip technology, shoppers should consider these five smart ways to use their credit cards during the holidays.
1. Buy only what you can afford.
The best way to use a credit card has always been to pay each month’s statement balance in full and on time*. Doing so allows you to avoid costly interest charges and late payments. But since about half of all Americans carry a balance at some point throughout the year, it’s already too late for them to avoid interest charges. As the saying goes, when you find yourself in a hole, the first thing to do is to stop digging. So even if you currently have a revolving balance on one or more of your credit cards, it should be your goal to enter the new year without increasing the amount of your debt further.
*This is true when it comes to avoiding interest payments however you do not want to run up your card regardless of if you will pay it off at the end of the month. It is import to be cautious of how much is on the card AT ALL TIMES because you do not know what date the company will update your credit report.
2. Review store credit card offers before applying.
Along with holiday shopping discounts, shoppers will be confronted with pitches for store credit cards at nearly every major retailer that they visit. Frequently, these cards come with incentives such as 10% off of your purchases that day, or the promise of coupons arriving in the mail. Unfortunately, the checkout counter of your favorite store is not the ideal place to make an important financial decision like applying for a new credit card. You’ll rarely have the time to fully examine the cardholder agreement that you are being asked to sign, let alone compare it to competing offers.
While there are some good store cards offered, be sure you’re getting a good one and that you can make the most of its rewards.
3. Consider using a card that offers interest-free promotional financing for your holiday shopping.
If you know that you will need to take some time to pay off your holiday purchases, you should consider applying for a card that offers 0% APR promotional financing for new purchases. The key to this strategy is using the interest-free financing as an incentive to pay off your balance sooner, rather than as an excuse to postpone repayment. Be aware that this card requires good to excellent credit.
4. Maximize your rewards, but don’t overspend to earn more.
If you are among the half of Americans who avoid credit card interest charges by paying their balances in full each month, then you should be trying to earn as many points and miles as possible from your holiday shopping. So feel free to earn the most rewards from holiday shopping but remember that you will not come out ahead if you make unnecessary purchases in order to earn more rewards.
5. Know your benefits.
Many credit cards come with valuable shopping protection policies that can apply to your new purchases. For example, a feature common to many credit cards is extended warranty coverage which adds a year to the manufacturer’s warranty. Another popular benefit is coverage against accidental damage and theft. There are even purchase protection policies that could help you get the best deal. But the key to using these policies is to know what’s covered and what’s excluded by the purchase protection policies. In addition, you should make sure to keep a copy of the retailer’s receipt and the credit card statement, so if you need to make a claim one day, you will have everything you need.
I hope this article reminds you to stay smart this holiday season and that you too learned some helpful information.
As always if you could use our help call us today to come in for a FREE CREDIT REPORT CONSULTATION to discover how we can help you reach your credit goals!