Credit Score Tips & Money-Saving Hints

With less than 2 months till Christmas, its prime time to be writing up your Christmas gift list, doing some window-shopping, and scouring deals for Black Friday (3 weeks away!). But are you also getting your wallet ready for the holiday spending spirit? Budgeting and practicing within-your-means spending is going to be key to surviving through to New Years with your credit score intact and your finances out of debt.

Not to put a damper on the joy of the coming months, but realistically this holiday season could be a minefield of risks that could blindside your credit report and bank account. Racking up charges up to your credit limit could lower your score, extra fees on credit cards and the risk of overdraft charges on debit cards take chunks out of your savings, and just like with holiday pounds, you could gain debt faster than you can work it off. WiseBread posted an interesting blog about “frugality fatigue,” suggesting that after the recent years of tightened spending and penny-wise habits, people are looking to spend and return to the old ways of credit cards and overspending. An American Express survey of consumer attitudes found that 80% of consumers still intend to buy gifts this holiday season, with 36% planning to spend $100-$499, 28% to spend $500-$999, and a full 30% spending $1,000 or more.

Whether you plan to spend $100 or $1,000, the next two months of gift shopping, eating out, entertaining, and traveling could deplete your savings and hit your credit score harder than you are prepared for. Besides healthy credit and stable savings, there are many good reasons to be prudent with your holiday budget this year so you can start 2010 in good financial health. The following tips can help you save money and care for your credit without skimping on the holiday extravagance:

Protect your Credit

1. Plan ahead to minimize overspending – Before you even go to the mall or shop online, make a list of who you have to buy for and stick to it. It will help you stay on budget and on track, and minimize the possibility that you might start browsing and shopping for yourself. Also, remember as you shop not to overspend just because you might be charging credit. Rule of thumb: spend only what you can afford to pay off RIGHT NOW; shop like your credit card is a debit card and go straight home after shopping and pay off your credit card so you won’t be tempted to carry a balance and rack up interest charges.
2. Opt out of traditional credit cards – Pre-paid credit cards are a good alternative to credit cards because you don’t risk overspending on what you deposit, you can still build credit, and you won’t pay interest; the trade-off is you have to pay an annual fee. Or think about paying cash or using a secured card, both of which will not hurt your credit score.
3. Steer clear of store credit cards – Read the fine print of a store credit card or retail card and you may find that the membership benefits or special discounts you’d receive for opening the card isn’t worth the high interest rate and extra charges that comes with it. Store credit cards typically have a interest rate far higher—sometimes double the APR like Macy’s 23.99% APR or JC Penney’s 24% APR card—than a normal credit card. Also, store credit cards often stipulate that you must spend a certain amount through the year in order to qualify for discounts or benefits, have high late payment fees that increase with the balance, require a minimum purchase within a period of time to keep the benefits, and more. However, store credit cards are beneficial if you are sure to pay off your balance in full every month, that way you can get your 15% discount without risking paying a 25% interest rate. For information on specific cards pros and cons, check out Store Credit Cards: A Rip Off?

Shop smart, shop early

1. Save on shipping – More and more on-line retailers are extending offers of free shipping to get more customers clicking and buying. Look out for major retailers like Target, which launched its holiday free-shipping promotion on Nov 1, Walmart, which ships free to a nearby store, and more stores mentioned here to see where you can save. More tips:
   • Some online merchants time their free-shipping deals right before the week of Thanksgiving and Christmas to move inventory faster.
   • Websites like freeshipping.org and coupon sites like slickdeals.net and fatwallet.com list specific merchants with free or discounted shipping. Also, mark your calendar for Free Shipping Day, when participating merchants offer free shipping this Dec 17 and guaranteed delivery by Christmas Eve.
   • Amazon’s “Super Saver” shipping gives free shipping for most purchase orders over $25; if you are a few dollars short of $25, www.slickfillers.net lists items as low as $0.35 so you can fill in the few dollars or cents and get free shipping.
2. Get it while it’s hot and in stock – Ever heard of deal-of-the-day sites that only sell one product at a time, at a deeply discounted price, until it runs out and moves on to the next item? They are insanely popular all over the web and addictive to watch and track to see what the next item will be. Deal of the Day Tracker monitors most of these sites, which sell everything from discount duds to army knives and electronics, and shopping here could save tons of money on high-quality gifts and also practical items. Some sites, like Red Tag Crazy, can alert you via text message, e-mail, or instant message so you can know what is selling like hotcakes at 3 am.
3. Check your mail - Going through your junk or spam mail can pay off if you find some special offers from retailers’ emails. More and more retailers are sending customers special offers by e-mail or mail instead of mass advertisements of sales. Sign up for mailing lists or loyalty clubs at stores you want to spend at (for buying gifts for others, not for yourself!), and pay attention to email (you might have to wish out of your junk mail folder) that might hold big sales or coupon codes exclusive to customers on their mailing list.

At Credit Karma Blog, what goes around comes around… So what do you think about this post? Agree, disagree, or have something more to say? We’d love to hear your reactions!