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10 Important Tips You Should Know About Credit Cards to Save Money, Time & Grief

The average American spends the first six months of every year paying off their holiday debt from the year before. Overspending, opening new credit accounts and generally just spreading your finances too thin is especially tempting as you succumb to the "spirit" of the holidays.

Every time you open a new card account, a creditor checks your credit report. These "hard" inquiries count against your overall credit score.

That spirit has Americans planning to spend an average of $1,096 on holiday presents this year, up $207 from 2004. But before you dust off your trusty credit card for its busiest time of the year, read up on these 10 tips that will keep you and your credit scores merry and bright.

1. Stay away from high credit balances and too many accounts.

Charging high amounts to your credit cards and carrying them over month to month can lower your credit score, even if you are making payments. That's because the high balances could indicate that you may have bit off more than you can chew, financially speaking.

Opening too many new credit or charge accounts can also negatively affect your score -- it may indicate that you're spending more than you can honestly afford.

2. If a creditor inquires about your credit score, it counts against you.

Every time you open a new account, a creditor will check your credit report. This is what's known as a "hard" inquiry, and it's figured into the formula for calculating your final credit score. Too many hard inquiries can, indeed, count against you. "Soft" inquiries, however, (such as when you inquire about your own credit report) do not get factored in.

3. Pick a card that fits your needs.

There are all kinds of credit cards out there -- those that offer airline, merchandise or travel rewards, those that offer extra warranties or accident insurance for electronics or travel and those that offer low, fixed interest rates. Depending on your needs and lifestyle, you should choose a card that can benefit you the most.

4. Have your name taken off of credit marketing lists.

If you find it tempting (or just annoying) that credit card companies are mailing you marketing materials to get you to sign up for their cards, you can have your name removed from their lists (similar to the National Do Not Call Registry).

You can do so:

  • Online using the "opt-out" form at

  • By calling 1-888-5-OPTOUT to request a hard-copy opt-out form.

5. Be aware that closing an account doesn't mean your score will increase.

Depending on the situation, closing a credit account could actually hurt your score because it could increase the balance-to-limit ratio. However, it may also raise your score if you have too many cards open (see #1), or have no effect whatsoever. The card you choose to close can also make a difference. For instance, a card you've had for a long time that is in good standing may positively impact your credit score, so that would not be the one to choose to close.

6. Pay more than the minimum balance each month.

The typical credit card purchase is, on average, 112 percent higher than if using cash. That's because creditors make money from your interest payments, which can add up to thousands of dollars in no time. If you only make the minimum payment each month, you will end up paying much more than you intended to, and more than the purchase was worth. Even doubling the minimum payment means that you'll pay the card off twice as fast, and save yourself hundreds, if not thousands, of dollars in interest.

7. Know the credit lingo.

Charge cards, credit cards and secured cards are not one in the same. A charge card, such as American Express or Diner's Club, requires that you pay the balance off at the end of each month. If you are late with the payment, you may be charged very high penalty interest charges.

A credit card, on the other hand, allows you to carry over a balance from month to month. However, it also allows you to accumulate interest charges. A secured card is a credit card that is backed by a bank deposit by the consumer. People who may not be able to get an unsecured card can often qualify for a secured card and use it to establish credit.

Tempted to splurge because you know you can pay for it later? Remember that the bill will come back to haunt you.

8. Creditors decide whether you're a good credit risk.

The criteria used in determining whether or not you qualify for a credit card is not set in stone and varies by creditor. In this way, you may qualify for one card but that doesn't mean you will automatically qualify for all similar cards. If you are ever denied credit, however, the creditor must give you a copy of your credit report, along with an explanation as to why you were denied.

9. Know your rights if your card is stolen.

Under the Fair Credit Billing Act (FCBA), consumers can dispute certain charges on their cards and have limited liability if fraud occurs. The important things to remember are:

  • You are not liable for any charges on your card that appear after you've reported it stolen.

  • Any charges incurred after the card is stolen -- but before you've reported it stolen -- should be waived after a $50 fee. This holds true as long as you report the card stolen within a reasonable amount of time (usually 24-48 hours).

10. Try to use some self-control.

Though you may be tempted to splurge on holiday gifts or other items knowing you don't have to pay right away, remember that the bill will eventually come. If you know you won't be able to pay for a purchase, don't buy it. Likewise, in the event you must charge a large amount of money for emergency purposes, set up a plan to get it paid off as quickly as possible so it doesn't spiral out of control.

Recommended Reading

The Six Debt Triggers for Women

Kids and Money: 5 Keys to Teaching Kids Money Management Skills


Credit Matters: 10 Things to Remember About Credit Cards Over the Holidays

ABC News: Holiday Spending

Avoid the Holiday (Over)Spending Blues

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