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Credit cards and last minute holiday shopping

Seven On Your Side
December 19, 2011 2:21:13 PM PST
This is the week people go overboard. There's no time to shop around, so you blow your budget up grabbing expensive items just to finish the shopping list.

This is when you need to be very careful with how you manage your credit debt. There are ways to get it all done without weakening your credit score.

Remember, it's better for your credit score to have a little debt on a number of cards, rather than maxing out one credit card to its limit.

"Banks, lenders get very nervous if they think you're on a credit spree. Also if you're moving close to the upper limits, the implication is you might be having financial issues and you're turning to credit as an alternative source of lifestyle support," explained financial Expert Adam Levin.

He calls this time of the year "acquisition ecstasy"- a short-lived credit spree, which will turn to buyer's remorse when you get the bill 30 days later..

Chanel Rowe learned that the hard way. She says it took her years to fix her credit score.

By spreading your purchases out on different cards, lenders will see you still have plenty of available credit left.

"Use one, run up a little balance, pay it off put it away. Then you use another one, run it up, pay off the balance, mix it up," she said.

But if you do lose control during the holidays don't overreact and suddenly close your credit card accounts. You may think you're showing restraint, but what you'll be doing is lowering your credit score. Better you keep the account active and lock up the plastic.

"If you want keep it in a safe deposit box, shred it, give it to your mother - that's your decision, but the fact of the matter is that you need to have as much available credits as possible because it impacts your utilization percentage," Levin said.

If you don't have self control and you're running low on credit, many fall prey to opening a store credit card. The purchase discount is so tempting, but in the end the super high interest rates will get you.

"It might take you longer to pay off the balances, which then gets into the whole issue of am I using too much of my available credit and am I carrying balances for too long," Levin said.

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