Know Your Credit Card Before Christmas Shopping
The Christmas shopping season is about to begin. Before you even make your shopping list, take time to review your credit card statement and its terms and conditions. Using the wrong card can significantly add to the costs of your Christmas purchases.
If you look at nothing else, know what your credit limit is for each card. If you plan on using your credit card for most purchases, make sure you have room on your credit limit. It is a good idea to pay more on your balances in November and December to make sure there are no surprises when you receive your January bill with the Christmas charges.
"The cardholders who really have to watch their step are the ones with a low credit limit, especially going into the Christmas shopping season. If you are close to your limit on these cards, it will be too easy to go over your limit with a few Christmas purchases and be hit with high fees and much higher interest rates," says Bill Hardekopf, CEO of LowCards.com. "Unfortunately, most card issuers will accept your card for payment even if that purchase sends you over your credit limit. It is up to you to be responsible for knowing what you owe. If you think you may be close, call your issuer and ask for your balance, or set up an email notification through your issuer that lets you know when you are close to your limit."
Another area to pay attention is how finance charges are calculated. If you pay off your balances most months of the year, but take a few months to pay off Christmas purchases, avoid using a card with two-cycle billing. Carrying a balance eliminates the grace period on new purchases. In a two-cycle billing period, the issuer can charge interest retroactively.
For example, assume you have a zero balance on your credit card at the beginning of December and charge $1,000 for Christmas purchases. In January you pay $990, and expect to pay interest on the remaining $10 on the next bill. Instead, two-cycle billing charges interest on the full $1,000, even though you have already paid 99 percent of the balance on time. While you only owed the credit card company $10, the interest charged will be approximately $11.02 (13.2% APR). With single-cycle billing you would have paid only $.11 for interest charges.
Most importantly, set a Christmas season budget that you can afford, and stick to it. "Charge only what you can pay off by March and stick to that. If you are still paying interest payments on Christmas purchases in July 2007, then you charged too much," says Hardekopf. "You don't want to pay interest on Christmas presents, meals and entertainment long after you have forgotten what you are paying for."
LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over six years.
If you look at nothing else, know what your credit limit is for each card. If you plan on using your credit card for most purchases, make sure you have room on your credit limit. It is a good idea to pay more on your balances in November and December to make sure there are no surprises when you receive your January bill with the Christmas charges.
"The cardholders who really have to watch their step are the ones with a low credit limit, especially going into the Christmas shopping season. If you are close to your limit on these cards, it will be too easy to go over your limit with a few Christmas purchases and be hit with high fees and much higher interest rates," says Bill Hardekopf, CEO of LowCards.com. "Unfortunately, most card issuers will accept your card for payment even if that purchase sends you over your credit limit. It is up to you to be responsible for knowing what you owe. If you think you may be close, call your issuer and ask for your balance, or set up an email notification through your issuer that lets you know when you are close to your limit."
Another area to pay attention is how finance charges are calculated. If you pay off your balances most months of the year, but take a few months to pay off Christmas purchases, avoid using a card with two-cycle billing. Carrying a balance eliminates the grace period on new purchases. In a two-cycle billing period, the issuer can charge interest retroactively.
For example, assume you have a zero balance on your credit card at the beginning of December and charge $1,000 for Christmas purchases. In January you pay $990, and expect to pay interest on the remaining $10 on the next bill. Instead, two-cycle billing charges interest on the full $1,000, even though you have already paid 99 percent of the balance on time. While you only owed the credit card company $10, the interest charged will be approximately $11.02 (13.2% APR). With single-cycle billing you would have paid only $.11 for interest charges.
Most importantly, set a Christmas season budget that you can afford, and stick to it. "Charge only what you can pay off by March and stick to that. If you are still paying interest payments on Christmas purchases in July 2007, then you charged too much," says Hardekopf. "You don't want to pay interest on Christmas presents, meals and entertainment long after you have forgotten what you are paying for."
LowCards.com ( http://www.lowcards.com ) is an independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards/rebates, and lowest intro rates. It also gives and unbiased ranking and review for each card. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for over six years.
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