12 Credit and financial tips for the holidays.

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The holidays are here, and while it’s a golden time to enjoy family, friends, give back to others and the many blessings in our lives, it’s also a time of year that can be dangerous financially. In fact, most households see a huge spike in spending and debt over between Thanksgiving, Christmas or Hanukkah, New Years – so much so that many retailers make 15-20 percent of their total annual sales during that period. Add in Valentines Day, winter family vacations and possibly a couple birthdays, and it’s a time of year that could break the budget and crash your credit score.

The good news is that the holidays don’t have to time to see your debt and spending spin out of control. Here are 12 tips to help you save money, plan responsibly, keep your debt level down, and protect your credit score.

1. Set a budget
Did you know that the average American plans on spending $812 on Christmas or holiday gifts? While that is a significant amount of money, the reality is that we often shoot far past what we intended to spend, especially if you add in extra holiday meals, entertainment, decorating, parties, etc. So this holiday season, set a realistic budget and stick to it, skipping those extra money wasters that are necessary.

2. Consider spending cash
Studies show that we spend far more when we pay for purchases with a credit or debit card compared to cash. So this holiday season, visit the bank and take out the cash you’ll need for each gift on your list. You’ll end up spending less overall and also won’t have a big credit card bill come January or February – or a potential hit to your credit score.

3. Set gift limits
Have you ever given someone three presents totaling $150, only to receive a $20 gift in return? Have a conversation with your friends and family to determine if you’ll exchange gifts, how many, and set a spending limit. You may be refreshed to hear that many of your friends would rather spend time with you or go out to dinner than receive a gift, which means you’ll have more money to spoil the kids!

4. Don’t open store cards
You’re at the cash register at your favorite store at the crowded mall, doing some late Christmas shopping, when the friendly cashier asks the inevitable question, “Would you like to open a store card and get an additional 20% off your purchase today?”

You look at the pile of your things and do the math – saving 20% on the bill would add up to enough to buy you a nice lunch AND a Starbucks for the ride home.

Wait!  Stop!  This scenario is played out millions of times during the holiday season and throughout the year, with virtually every big retailer offering store credit cards these days.  But even though it seems like a hospitable offer for a generous discount, applying for additional credit may really hurt your credit score. Store retail credit accounts often have high interest rates, low balances, hidden fees, and aren’t looked at favorably by the credit bureaus. Instead, skip the store cards and keep a responsible, low-interest card that gives you cash back or reward points.

5. Pull your credit
Most of us have been charged to pull our credit report at some time, or go onto one of those “free” sites, only to be hit with a $15 hidden fee to see the full report.  But according to the Fair and Accurate Credit Transactions Act (the FACT Act), you are eligible to receive a free copy of your credit report once each year from each of the three major credit bureaus by going to www.annualcreditreport.com.  This will show your credit history, not your score, but at least you’ll be able to monitor your credit activity and make sure you’re on track.  You can also receive a copy of your credit report through a company like Blue Water Credit or a mortgage lender when applying for a loan. No matter where you get it, you should review your credit report and score before and then after the holiday shopping blitz.

6. Be wary of identity theft
Identity theft and crimes of financial and data theft are more prevalent than ever in the United States, with approximately 20 million people having their identities used fraudulently this year. The bill on that theft is upwards of $50 billion dollars – three times more than the combined $14 billion in losses from all other types of consumer theft (burglary, motor vehicle theft, property theft, etc.) combined. It also takes a lot of time and often money to clear up the mess identity thieves leave behind, as a compromised credit report will set off a domino effect of raising interest rates and even insurance premiums. On average, each identity theft victim suffers direct losses of $9,650, up from just $3,500 a few years ago.

So review your credit report, don’t use credit cards on fishy sites, don’t ever make purchases or give your financial details on public or unprotected Wi-Fi networks, change passwords frequently, and generally stay vigilant and protected.

7. Don’t max out credit cards
It’s really easy to max out credit cards during the holidays, but that could cause serious harm to your credit score. In fact, consumers with a score over 760 have an average credit card utilization (aggregate credit card balances relative to credit limits) of only 7 percent, and keeping under 30 percent will keep your score healthy.

8. Make payments ahead of due date to protect your credit score
It’s easy for consumers to know when their credit card’s Due Date and pay on time, but there’s another number that you should be aware of, which is often a secret. Each creditor also has a Report Date – when they send their information into the credit bureaus and FICO. If you use your credit card a lot and pay it off at the due date, the higher balance will always show on your credit report that month because Report Date is before Due Date. So a great tip to increase your credit score is to call your creditor, ask them what day they report, and make sure to pay your accounts off or down before that date – not the due date.

9. Check discount codes for online shopping
If you prefer to shop online from the comfort of your warm and cozy couch instead of battling crowds at the mall, you should take advantage of discount codes. Also called promotional codes, discount codes are like online coupons that allow you to save a boatload of money on your Internet purchases. When you go to a retailer’s website, you’ll see a box to input a discount or promotional code.

The savings vary greatly – sometimes it’s just 5%, but other discounts can go up to 50% off, or other packages or promotions that will amaze you. Don’t despair if you don’t have a code – you can simply Google them or there are third-party websites that help track codes for free.

10. Have a plan to pay off debt
If you don’t do you your holiday shopping with credit cards, not cash, make sure you have a sound plan how and when you’ll pay them off. It’s best to pay it off in one lump sum before interest charges even kick in, but if that’s not possible, then set a schedule of extra payments you’ll make to get your card paid off at least within the first couple months of the next year.

11. Put some money aside for emergencies
Murphy’s Law dictates that the least convenient time something can go wrong, it will. So put a few hundred dollars aside in case of emergencies or special events over the holidays. That way, if the water heater explodes Christmas morning, the car breaks down on the way to the office holiday party, or you run up your cell phone bill wishing everyone a happy New Year, you’ll be covered. The best part is that if nothing happens that warrants spending your emergency fund money, you can use it to pay off debt, add it to savings, or invest the money.

12. Start saving for next year
Now that you’ve had a great holiday, it’s time to start thinking of next year! Open a separate savings account or out aside an envelope and deposit some money every month once you get paid, not to be used for anything else. Even $25 or $50 a month will add up to big bucks that can cover most of your holiday gift giving budget come next winter!

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