Tips for saving during the holiday season

FOX19 - Financial expert Britt Scearce of Emery Federal Credit Union visited FOX19 NOW to explain how you can save money this holiday season. Here are his tips:

1. Use cash- you typically spend 12-18% more when using credit card

When you pay in cash, you can "feel" the money leaving you. This is not true with credit cards. Flipping a card up on a counter registers nothing emotionally. If you use plastic instead of cash you will spend 12 percent to 18 percent more. This is money you could have saved.

When McDonald's started allowing credit card purchases, the average purchase went from $4.50 up to $7.00. That's a huge increase.

2.  Avoid the temptation to open department store cards for the discount

When you apply for a credit card, the retail store or credit card company pulls your credit reports to check your credit history. Multiple inquiries could dent your FICO score by 15 to 30 points. FICO believes that consumers who open several accounts in a short period are at greater risk of falling behind on their debts.

These cards usually carry interest rates of 21-22%, so any discount that you received to open the account is quickly eaten up by the high interest charges.

3.  Maxing out credit card balances will affect your FICO credit score

A factor used to calculate your FICO score is your credit-utilization ratio, which is based on the amount of debt you have outstanding as a percentage of your available credit. The FICO model looks at the combined utilization ratio for all your accounts, as well as the ratio for individual accounts. That's where retail store cards can get you into trouble. Most retail store cards have low credit limits - usually well under $1,000. Even a relatively small purchase could generate a high utilization ratio for a new store card, which will hurt your score.

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