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1. Whenever you're shopping online, it's best to stick to big-name retailers or companies and stores you know and trust. Even with nationally known retailers, anytime you use your credit card for a holiday purchase, double-check that the URL (address) of the website starts with "https" and not just "http." The letter "s" lets you know it's a secure site. Also check for a lock symbol next to the URL, which also lets you know your transaction is secure.
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2. If you're in the mall and a nice lady behind the counter asks, "Would you like to save 20 percent off your purchase?" it may seem like a good idea to say yes. In reality, she's trying to get you to open a department store credit card for that discount. This is a bad move — especially if you do it frequently during the holidays. Each time you open a new store card, a "hard inquiry" is generated on your credit report, knocking down your credit score. Besides, department store credit cards usually have higher interest rates than national cards such as Visa, MasterCard, American Express or Discover.
3. If you're buying an electronics or tech item, you may be asked whether you want an extended warranty. It's usually wise to decline retailers' insurance: It's often too costly and provides only limited coverage.
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4. When you've got a long gift list, it's tempting to turn into some kind of Super Santa. But buying a boatload of presents by maxing out your credit cards isn't the way to create holiday magic. Tapping the limits on your cards is detrimental to your credit and your overall financial health. Plus, if you max out your credit cards, you could wind up getting declined — and embarrassed — while you're out holiday shopping.
5. Credit card companies and retailers have figured out that consumers love to get freebies or bonuses to "reward" them for their spending. When you receive reward points, miles for travel or other discounts based on spending you were going to do anyway, that's one thing. But going out of your way to buy pricey gifts just to rack up reward points is foolish because the perks you'll get rarely justify the cost of such expensive goods.
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6. Banks and credit card issuers also love to send tons of cash-advance offers in the mail during the holiday season. Don't take the bait. Cash advance fees, which can run 3 percent or more, and high interest charges can make these "deals" far less than spectacular.
7. It's a joy to be able to give generously to your kids or grandkids during the holidays, but don't make the mistake of putting them as a user on your card if they aren't ready for the responsibility. Their idea of sticking to a budget or using the card only for emergencies may not coincide with yours. You could wind up with a shockingly large bill when your credit card statement arrives in the new year.
8. Layaway can help you stay out of debt by letting you pay for holiday purchases in cash over time. This year, many retailers have extended their layaway options to last as long as two or three months. But if you ultimately don't pay in enough cash to pick up your layaway purchases on time, and you're forced to pay for them at the last minute with a credit card, you've negated the whole benefit of layaway.
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9. Making minimum payments on your credit cards is almost never a good idea, mainly because you'll spend a lot longer time in debt, and you'll pay a lot more in finance charges. Ideally, after doing your shopping this holiday season, you'll be able to pay your credit card balances in full. If that's not possible, plan to charge no more than what you can pay off in three or four months.
10. Being 30 days late and missing a single payment on a credit card can drop your credit score by 50 to 100 points. You never want your holiday indulgences to crimp your ability to pay your bills on time. In today's financial environment, your credit score matters tremendously: It affects your ability to get loans, rent an apartment or buy a home, and even obtain secure affordable car insurance rates. Enjoy the holidays as much as you'd like, but make merry within reason. Use your credit cards responsibly and make all required payments on time.
Lynnette Khalfani-Cox, the Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and Facebook.
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