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Ways to avoid holiday credit card debt

MARCELLUS, N.Y. (WSYR-TV) — Many stores are slammed with Central New Yorkers checking off their Christmas wish lists, while others are shopping online, filling up their virtual carts. Many are turning to credit cards to make holiday dreams come true. But going down that road could make for a very stressful start to the New Year.

Swiping that credit card may seem like the easiest way to pay for those Christmas presents.

“The holidays are one of the times where people get themselves into big trouble with credit cards by charging more than they should,” said Rick Reagan, CFP, MBA of The Reagan Companies.

So you might want to think twice before you swipe, or this Christmas could take years, sometimes even longer to pay off. Especially now, with interest rates at their highest in decades, averaging around 22%.

“So to put 22% interest rate into perspective, if you charge $1000 and you don’t pay it off over the course of the year, you’re paying $220.00 in interest, and you still have to pay off the thousand. So you do not want to be running up a big credit card balance,” said Reagan.

If you’re thinking about opening up another credit card to transfer balances, don’t. Reagan says that’s a sign you’re charging too much. Instead, try cutting those cards up so you can concentrate on paying them off.

“Another thing people hear a lot is when you go to check out at the store, they’ll go “Hey, do you want to save 10% on today’s purchase by taking out a new credit card,’” said Reagan.

Saying “yes” typically is a bad idea.

“Store credit cards are usually going to carry higher interest rates. They’re going to have usually lower credit limits on it, which can actually hurt your credit score. So, generally speaking, I don’t recommend store credit cards,” said Reagan.

However, Reagan says there is an exception to when a store credit card can make sense.

“Let’s say you shop somewhere all the time, and they’re going to give you a lot of money back, say 5%. That’s a lot of money if you shop there a lot and you can afford, and here’s the key, and you can afford to pay it off every month, then it makes sense,” Reagan said. “So there’s nothing wrong with using a credit card if you’re sure you’re going to be able to pay it off. You can get free points, you can get some protection, so I’m not saying don’t use a credit card. But I’m saying if you can’t afford to pay it off, don’t use a credit card.”

So, how can you avoid falling into holiday debt?

“If you don’t want to get into debt, it’s pretty easy. You can use your ATM card instead of using the credit card. That way, you’re ensuring you’re not going to get into debt,” said Reagan.

And if you’re still wary, just use cash.

Reagan says cash can be king, and if you leave your credit or debit card at home and just use cash, he says you’re ensured to not spend more than you can afford.

Reagan encourages shoppers to try and stick to their budget.

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