Credit or DEBT? Choose to Shop Smart

Let’s talk about credit cards. Yeah, we know… it’s a love/hate relationship, especially during the holidays. It’s so tempting and easy to get caught up in charging all or most seasonal expenses. You’ll pay the credit card off later right?

A new report states that Americans plan to increase their holiday spending nearly 20 percent from 2010. A separate study also revealed that 36% (of those surveyed) are not saving in advance for the holidays. Does that number include you? And if you so, are you ready to tackle the bill and extra debt?

We make all type of justifications as to why we should buy a particular item, never realizing the consequences or that it is possible to manage your credit card effectively. But there is hope everyone! Check out our list of credit cards tips below and as always, share your thoughts.

Shop Light, Shop Smart
First, decide which credit cards are hurting you the most (aka high interest rate cards) and leave those at home.

Keep a Reserve
Keep a second card on you for emergencies ONLY. If you must, carry a third card for purchases, but make sure this card carries a low interest rate.

Check Us Out
If all your cards carry high interest rates, look into the ILWU Credit Union Visa Platinum card. APR is as low as 9.95%. You also have the chance to win $250 cash this month. Savings and extra cash are two things everyone loves!

Spend $100, Pay $100
Don’t spend more than you can afford. We know, this is easier said than done, but do your best to shop smarter by creating a budget before you hit the stores. More holiday-saving tips here.

Let Your Smartphone Help
Don’t care for budgets? Then at the very least keep track of your expenses, specifically paper receipts. If you have a smartphone, definitely check out Lemon. The app is compatible with Android, iPhone, iPod Touch and iPad, and allows you to snap photos of your receipts. The app then does the rest. Your receipts are digitalized and stored giving you a quick snapshot of your spending.

Give Your New Balance a Hard Tackle
Don’t spend what you cannot pay back in 2-4 months. Once you receive your credit card statement for your new charges, submit a large payment so you have a small and manageable balance for 3 months. For example, if you charge $500, submit $300 or $400 payment in the first month. This results in a smaller balance that you can realistically manage in 3 months. Total debt life is now cut down to 4 months and not years!

Don’t Give in to the Department Store Offers
Avoid the department store credit cards. It’s hard to reject a 30% off (or more) deal tied to a credit card, but for your financial sake, turn down the offer. Most department store credit cards carry a high interest rate (20% or more) and can add a sufficient amount of interest to your end balance. If you must take advantage, charge only a small amount and pay off the balance in 30 days.

Check Online Resources and Look at Current Statements
Still think interest won’t hit you hard? Check out these credit card interest calculators or just glance at your recent statement. Under the Credit CARD Act of 2009, credit card companies must now disclose the total interest amount paid if a cardholder makes minimum payments only. Creditors also need to include the payment amount required to pay the debt in three years along with the amount of combined interest for that same time period.

Wait a While
The item above also brings another point to mind: the closing of credit card accounts. It’s a liberating feeling to pay off a balance and then close the account immediately, but before you do your happy dance and cut your paid credit card, wait. Wait at least three months – this is how long it takes for the credit bureaus to realize that your account is now paid in full. Once the zero balance is in their records your credit score improves because you now have less debt. Moral of the story : wait 3 months.

Extra Tip: Never close your oldest credit card account, unless you have personal reasons for doing so of course. The older the credit card, the more established your credit is. So if you’re trying to improve your credit, pay off your credit card balance and use the card to make small purchases, then pay it off again. The point here is to maintain little or no debt.

How will you shop this holiday season? Cash or charge?

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About the Author

Alejandra Gutierrez Alex is the new Social Media Specialist for the ILWU Credit Union. She's a 'nerd' at heart who enjoys community building. Her obsessions: baked goods and old mariachi ballads.