Are you trying to come to terms with your holiday gift budget? If your list of gifts to purchase keeps growing longer, and the total keeps climbing higher, you may start wondering if it would be easier to just charge everything to a credit card.

But is that a good move? What effect will that have on your credit score, your budget, or your plans for larger purchases next year? We have some advice from our experts to help you make an informed decision this holiday season.

Determine if Using a Credit Card is the Right Choice

First, you should carefully consider whether using a credit card is a good choice for you.

Some things to think about:

• How you approach money and spending: Are you good at managing bills, stress, and budgets? Do you make payments on time? Is your budget maxed out? Do you have experience successfully managing credit cards and loans? You know yourself and your finances best. If you already struggle with credit card debt, you may want to consider other options, as it could introduce extra stress and strain on your finances.
• How familiar are you with your credit score? Before opening a new credit card, you’ll want to know how credit cards and new credit accounts can affect your credit score and your overall financial stability.
• Choose the card that’s right for you: Which one matches your budget, your spending habits, and your shopping preferences?

Take Advantage of Promotions

Choosing the right card can include signing up for a new card that is having a current promotion – something you should plan to “shop around” for.

If a card has 12 or 18 months with no interest, that card could be a good option for holiday shopping--especially if that promotion also includes balance transfers. With balance transfers, you can switch over multiple cards with higher interest to the new card and take advantage of that interest-free promotional rate in addition to checking off your gift list.

Use Rewards Cards

You may also want to consider a card with special rewards or perks for purchases. But instead of trading in your rewards, that cash back can be used as a statement credit to pay off your card. For example, if you purchase holiday gifts on a rewards card and get $75 back, applying that $75 as a statement credit means that you actually spent $75 less than your shopping spree’s total.

For customers who are planning to use a credit card frequently, having a rewards card really pays off. Combined with a zero percent interest promotion, a rewards card can be a really powerful financial tool as long as you stay on top of payments.

Avoid Store Credit Cards

However, using a store credit card for holiday shopping may not be the right choice. Applying for a store credit card results in a hard pull on your credit, which will lower your score. So if you apply for multiple store credit cards in a holiday season, it can quickly put a large dent in your credit score.

Opening multiple store credit cards can also negatively impact your ability to get a loan in the future – even if you don’t use them, or they don’t have a balance. Credit card limits count towards your debt-to-income ratio, even if you don’t have a balance on them. When you apply for a loan, the underwriter has to calculate a percentage of use for each credit card you hold.

In other words, loan underwriters have to consider what would happen if you did use those cards and whether that would impact your ability to pay on your loan.

If you, say, apply for a clothing store credit card because they’ll give you a one-time 40 percent off for the holidays, you should consider the long-term advantages or disadvantages of the card. It may be better to choose a major credit card that’s not affiliated with a store. Being a bit “picky” and choosing a card you can use at any store, that comes with reward points or cash back and that has an interest-free period, may serve you better in the long run.

Practice Responsible Credit Card Usage

If you do decide to purchase your holiday gifts on a credit card, remember to practice responsible credit card usage.

That includes:

• Only charge purchases you know you can pay off, in full, by the end of the month.
• Not using more than 30 percent of your credit card balance.
• Making payments on time.
• Keeping a close eye on credit card statements in case of potential fraud.

No matter how you choose to shop this holiday season, we hope you have a wonderful holiday season with your friends and loved ones. If you need any help budgeting for the holidays, some more advice on how to select the right credit card for you, or general help with building a solid financial foundation, our attentive local bankers are happy to help – visit your local banking center or make an appointment online!