Learning to manage your money is the best thing you can do for yourself today and for your future. We are here to help you save money and spend money wisely.
Today, you should have a savings account and put money into it on a regular basis, including gifts of money, allowances and money earned from a job.
Think about your future. Will you go to college? Will you have a job? Will you live at home or will you rent an apartment? How much will all that cost?
- Proceed with Caution when using Credit Cards
Using Credit Cards has Pros and Cons
PROS
1. Increased purchase protection, return protection, and extended warranties.
Lastly, many credit cards offer extended warranty protection on items charged to the card, typically extending the warranty to double the time period of the manufacturer's standard warranty, up to one full year. There are caps on coverage, so check the terms of your credit cards before charging.
2. Greater protection if your card is stolen. Both debit and credit cards come with real-time fraud monitoring and offer a zero liability policy for unauthorized purchases should the card get stolen. However, the protections for debit cards are more limited, and if the card holder fails to notify the bank within two days after discovering fraudulent charges, he or she could be on the hook for as much as $500.
3. Credit card rewards offer extra perks. For rewards card junkies, who know how to optimize rewards earnings, charging Holiday purchases to a rewards credit card can mean savings of 1 to as high as 5 percent, or higher, on purchases. Of course, to reap the benefits of those rewards, you have to pay the balance in full each month, or the credit card interest charges could quickly outweigh rewards earnings.
4. Credit cards may help build credit scores. Charging purchases to a credit card and regularly paying them off can help build one's credit score, because it demonstrates the ability to handle credit responsibly. Payment history makes up 35 percent of credit scores, and using different types of credit also boost scores, so having a credit card and paying the bill on time each month can enhances scores considerably.
CONS
1. With credit cards, you're more likely to spend more. Studies show that people spend more when they pay with credit cards than with other payment methods, including cash and debit cards. So unless you're confident that you'll be disciplined enough to stick to that Holiday shopping list and not get lured in by the irresistible offers retailers are sure to be rolling out for the Holiday Season, leaving your credit cards at home may be the best option.
2. It's easy to get caught in the credit card interest trap. Credit cards offering a 0 APR balance transfer or 0 APR on purchases may seem like just the thing you need to get you through the Holiday season. However, credit card interest rates are up, and once that promotional rate expires, you could end up paying interest as high as 22.99 percent on those Holiday purchases.
3. Credit cards may hurt your credit score. Just like credit cards can improve credit scores, they can hurt them. In addition to failing to pay bills on time, one of the worst mistakes many consumers make is carrying high balances on their credit cards. This negatively affects the credit-utilization ratio, another key component of credit scores, which account for 30 percent of FICO scores. The general rule of thumb is to use less than 30 percent of the available credit across all your credit cards, preferably keeping balances at 10-20 percent of the credit limit.
In sum, if used to your advantage, credit cards may come in handy for the Holiday season, but be cautious to stay clear of the pitfalls. And of course, using credit versus debit cards for Holiday shopping doesn't have to be an either-or. Consider using credit cards for larger purchases, and leaving them at home for everyday shopping trips to minimize impulse purchases.
