Do you know how much consumer credit card debt Americans have racked up? One billion? Two billion? Try over $880 BILLION! While credit cards can be great financial tools when used correctly, they can also lead to mountains of debt when used poorly.
With the holidays upon us, Putnam Bank believes it’s important to talk about responsible credit card use. Try these five tips to get everything you need for the holidays without spending yourself into debt.
Plan your credit card use
Just as budgeting for the holidays is a smart move, so is planning your credit card use. If you know what you want to use your credit card for, it becomes much easier to know what you’ll eventually have to repay. Having a good idea how much credit you’ve used also provides peace of mind.
Stick to one credit card
“Did I put the gifts for the kids on this card or this card?” Using multiple cards is an easy way to mix up how much of your credit limit you’ve spent and how much you owe your credit card company. However, there is an exception.
Observe the 30 percent rule
If you are depending on your credit card a lot this holiday season, it may be worth it to use two or three cards, depending on your credit limits. Why? Using over 30 percent of your credit card’s limit is a no-no in the eyes of the three major credit reporting bureaus, and could damage your credit score. So instead heaping all of your purchases on one card, you could spread them across multiple cards if you are planning on using a good amount of credit.
Say “no” to card deals
The holidays are a popular time for credit card companies to run “specials” such as forgoing your first two months’ payments or a special introductory rate. However, these so-called deals do catch up with you in the long run. Store credit cards, also referred to as loyalty or reward cards, also don’t generally give you enough of a discount to make them worth it.
Don’t use your card for everyday purchases
Things like gas, groceries, your mortgage payment and utilities should already be a part of your budget. Keep using cash or your debit card for these costs while using your credit card only for what you can’t cover with your normal income.
While rampant credit card use can make the holidays more extravagant, it can also lead to monstrous debt that may take several months to repay. Try the above tips if you plan on using your credit card during the holiday season to limit the debt you take on.
If you would like to add the flexibility of a credit card to your wallet, you can fill out our consumer credit card application online, print it and bring it by your nearest Putnam Bank office. We hope to see you soon!
Putnam Bank, Member FDIC and Equal Housing Lender