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Holiday Credit: 5 Steps to Prepare for Shopping Season

I purchased my first gallon of eggnog today, which officially marks the beginning of the holiday season in my mind. Let the overspending and overeating begin! Chances are you'll kick off the holidays this week with a tradition or two of your own. And if you're anything like the majority of people in this country, at least part of the excitement will include shopping like a crazy person. But before you hit the malls on Black Friday or your favorite websites on Cyber Monday, you may want to follow these 5 steps to make sure you're well prepared for the full-frontal assault your wallet is about to take.

1.) Budget, Budget, Budget! The best way to protect your wallet (and your credit) is to treat your credit cards like cash. If you budget wisely and only buy what you can afford to pay off with cash at the end of the month, there will never be a need to worry about annoying interest rates or fees come January. So budget, save, AND THEN spend. This way the only headache you'll wake up to on New Year's day will be from drinking too much of the bubbly. 2.) Strategize to Maximize Rewards Who doesn't love credit cards that offer rewards? But are you really using yours to bank the most rewards possible? Many credit issuers offer incentives during the holiday season to urge you to spend more on their cards. So make sure you stay on top of what incentives your credit issuers are currently offering. When you get to the cash register, you should know exactly which credit card in your wallet will reap the most rewards for your purchase. 3.) Watch Your Credit Utilization Ratio Let's face it- we all spend more than we really want to during the holidays. And spending more than normal generally leads to higher credit utilization ratios, which in turn will negatively affect credit scores. To hold your FICO scores right where you want them, make sure you keep your credit utilization under 30 percent and spread your purchases out across multiple cards if necessary. 4.) Don't Underestimate the Benefits of Purchase Protection Experts have estimated that a lot of shoppers will avoid credit cards and turn to cash or debit cards this year. If that includes you, you may want to think twice about the benefits of purchase protection, which most credit cards offer, before making any large purchases in cash. Simply using your credit card to make the purchase might protect you from not only receiving a faulty product, but it may also protect your purchase from accidental theft, fire, or damage for a specified period of time. 90 days is often the magic number, but you'll want to check your credit card agreement for the specifics. Try walking into Radio Shack after you purchased an item in cash and telling them you want a refund because it was stolen. They'll laugh you right out of the store. 5.) Keep Your Identity Safe It's no secret that identity thieves are out in full force during the holiday shopping season, so be sure to take some simple precautions that will help keep your personal information safe. If you're not sure where to begin, check out these 4 quick tips to protect your credit from identity theft.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

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