The do's and don’ts of using credit cards during the holidays

Yahoo Finance

The holidays are in full swing and so is the spending that comes along with them. In the frenzy of last-minute shopping, you could make some credit card mistakes that will stick around much longer than that hangover on New Year’s Day.

Americans owe $882.6 billion in credit card debt, with the average household carrying a credit debt to the tune of $15,611, according to American Household Credit Card Debt Statistics from NerdWallet.com. Follow a few simple “do's and don’ts” this holiday season to be proactive when paying with plastic.­­­­

The do's

Beware of the dreaded data breach. In 2014, there were a reported 720 data breaches with more than 80 million records exposed, according to Identity Theft Resource Center. With big box stores like Home Depot, Staples and Target all getting hacked this year, you need to be on high alert to stay a step ahead of cyber criminals. “If you have the option available, consider using a mobile payments platform like Apple Pay or EMV chip embedded credit cards,” says Jeanine Skowronski, Bankrate Credit Card Analyst. “Those offer some better security features that could protect your information.”

Pay along the way. There are advantages to using a credit card for most of your shopping — like better fraud protection, extended warranties and purchase protection. Skowronski says one way savvy shoppers can stay on budget is to link a credit card account to a debit card account and pay off purchases as soon as possible. She says this will help you be more mindful of your spending and help prevent you from being saddled with a big debt at the end of the month.

The don’ts

Don’t open credit cards from retail stores. Some retailers try to entice shoppers with a 10% or 20% discount on their purchase if they sign up for the store credit card. While that might be alluring, keep in mind the average APR of credit cards issued from America’s largest retailers is 23.23% — that’s more than 8% higher than the national average for all credit cards, according to CreditCards.com survey. And if you forget you signed up for the card, the results can be dire. “If you miss the first payment, your [credit] score could drop 70 to 100 points,” says Skowronski.

Don’t go for the quick cash. More than 12 million Americans take out cash advances every year, according to The Pew Charitable Trusts. Skowronski warns that using your credit card like an ATM is not a good idea. “The APR on that could be absolutely astronomical,” she says. “It could be in the high 20% to 30%, and it’s just not going to be worth it.”

Don’t spend more than you can pay off in full by January. Whether you plan on spending a little more or less this year, remember those bills will be showing up in just a few weeks. “What you should shoot for is to spend an amount lower than you can comfortably pay off by the due date of your December statement, which will likely be sometime around January 21st,” says John Ulzheimer, President of Consumer Education at CreditSesame.com.

Yahoo Finance hopes you do have a happy holiday, and don’t forget to share this story with friends.

Yahoo Finance is answering your money questions on Tumblr! Got a question about your credit score, your student loans, your retirement portfolio, your health insurance, or anything else finance-related? Drop us a line: YFmoneymailbag@yahoo.com.