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5 Tips to Control Credit-Card Use

The holiday shopping season is fast approaching, and for many consumers that means breaking out the plastic. Despite the importance of reducing debt in a recession, nearly a third of consumers plan on using their credit cards this holiday season, according to data from the National Retail Federation.

If you're planning on plastic instead of paper for your holiday shopping needs, consider these tips for keeping your credit-card use under control.

Choose rates over points: Most Americans have more than one credit card in their wallet. Your cards probably provide a variety of benefits: one for low rates, one with reward points or even one that contributes to your favorite charity. But while airline points are a nice bonus, such cards often carry higher interest rates, which add up if you carry a balance on that card. When you reach for your plastic this year, make sure you pick the one that charges the lowest rates.

Watch your limits: If you do decide to go with a single card as your consumer weapon of choice, be aware of its credit limit. Maxing out a card can have many negative consequences, beyond any embarrassment you might feel when your card is declined at the checkout counter. Not only can the credit-card company charge a nasty over-limit fee and bump up your interest rate, maxing out your card can trigger similar rate increases among other cards. And lastly, a maxed out credit card can negatively affect your credit score because the ratio of debt to available credit is a big determinant in calculating your score. One rule of thumb: Keep your balance at 30% of the available credit to avoid any slide in your credit score.

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