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Holiday charges on credit cards could prove expensive

Wednesday, December 22, 2010

Before you accept a new credit card, or decide to use all the credit on your card at the nearest retailer, you should give some thought to the cons of lowering your credit rating this holiday season. December in general and the holiday season is the time when customers are not really aware of the credit impact that some of their expenses would have on their credit ratings. A lot of customers are purchasing on credit, which means that the burden of household budget and the monthly payments on the debt could haunt them for a while. A recent study revealed that 13.6 million credit card customers are still making payments for last year`s holiday expenses. Running up debt is very easy with credit cards.

Those customers who shop using their credit cards spend on an average about 12 - 18% more than those who don`t use credit cards. This is because swiping credit cards is very easy while paying cash from the wallet proves to be difficult. Therefore, paying with credit could create issues for your financial plans, which may not come to your immediate notice but would trouble you later. The usage of credit cards is an important factor in FICO. The overall debt compared to the credit limit is used as a factor for calculating your credit rating. If you are using about 50% of your credit limit, holiday shopping would cost more because of a drop in your credit score resulting in higher interest rates in the future.