Keys to Financial Wellness
By Stephen Fournier, President, Central New York Market, KeyBank
Traditionally, Thanksgiving is a day of celebration, giving thanks and spending time with loved ones. It is the “unofficial” but well recognized kickoff to the holiday season, marked by parades, football games and lots of food. In recent years, it has also come to symbolize something else, something much more commercial . . . the start of the seasonal spending blitz — Black Friday.
Let’s face it, for most of us, our spending ramps up in November and December. We largely attribute it to the gifts we buy and the parties we plan. What we often overlook are the peripheral expenses — decorations, extra family dinners and breakfasts, spirits, travel and charitable donations. The result: we spend more than we want and often accrue debt.
This holiday season, you can avoid the headache of losing control of your spending by setting a limit, making a plan for how you will handle payments and tracking expenses so you don’t exceed your budget. The tool for helping you accomplish all of this — your credit card.
Make credit a tool, not a vice
According to the National Retail Federation’s Holiday Consumer Spending Survey, the average person celebrating Christmas, Kwanzaa and/or Hanukkah spent $805.65 in 2015. If trends continue, that number will rise a few more dollars in 2016.
Ideally, you’ve been regularly depositing money into a holiday savings account throughout the year. If you have, congratulations, you’re in rare company. Most people get through the holidays on credit.
Typically, credit card spending gets a bad rap. However, when done right, using credit cards to make your holiday purchases might just save you money. It can even help hold you accountable to your goals.
Here are two of the major benefits of using credit for your holiday spending:
- Rewards. If you’re in the market for a new card, the holiday season is a good time to be looking. Creditors often offer a generous signing bonus for spending up to a certain amount of money within your first billing month. Others offer points for items purchased on credit. So you can reap major rewards — cash, travel or coupons — for purchasing the gifts you already plan to purchase.
- Discounts. Most retailers offer savings and special promotions on in-store purchases made with their credit card. If you’re purchasing a big-ticket item or the smaller items on your list add up, consider opening a store credit card. You can save as much as 20 percent on your total purchase.
Of course, there are caveats. Too many open credit cards with outstanding balances will negatively affect your credit rating. The key words being: “outstanding balances,” because one of the biggest factors in scoring a strong credit rating is to maintain a low ratio of debt to the amount of money you can borrow. So the idea of too many credit cards being bad for your credit is an oversimplification of your credit rating. Other factors, such as average age of your credit cards, are considered as well.
This second point is directly tied to the first. You must pay off your balances. If not, any of the savings and rewards gained will quickly be erased by the interest you pay on your purchases.
If you already have credit cards, look through your wallet and utilize the credit cards that have a great rewards program attached to them. Many cards have up to 5 percent cash back on purchases. If you aren’t sure if your credit card has rewards you can call the financial institution or you can create an account online and check there. Some credit cards offer rewards that need to be activated before you can begin to accumulate them. So make sure they are activated. Put as much as you can on the same credit card to maximize your rewards faster.
Talk to your bank
Most banks are also in the credit card business. Ask if there are any rewards programs involved with debit or credit cards linked to your account. Often banks will offer cash back or gift cards when a certain amount of rewards are accumulated. For example, KeyBank’s relationship rewards programs lets customers earn points through everyday banking activities such as bill pay, credit card and debit card purchases, as well as provides discounts and coupons for shopping with their favorite retailers.
An added benefit of using your bank credit card or debit card is that it is connected to your bank account, which means you can set up mobile banking alerts to better manage and track your spending. Also, many banks have specialized services that allow you to set goals and monitor your progress in achieving them. For example, with KeyBank’s online banking tools customers can specifically set a target, like holiday spending, and easily stay-up-to-date with how their holiday spend measures against their planned budget.
Maintain your discipline
Just because you worked so hard racking up the rewards and cash back during this holiday season, don’t use it as an excuse to spend more than you planned. Also, commit to having a better plan for next year. By knowing how much you spent and on what, you can set a more accurate budget. Then you can start setting aside a little bit each month, so that next holiday season you can spend on your credit cards and have the confidence to know you can and will pay it all on time, while reaping major rewards along the way.
About the author: Stephen Fournier is president of KeyBank’s Central New York Market. He may be reached at either 315-470-5096 or [email protected]. This material is presented for informational purposes only and should not be construed as individual tax or financial advice. Please consult with legal, tax and/or financial advisors. KeyBank does not provide legal advice. ©2016 KeyCorp. KeyBank is Member FDIC.
5 Tips to Smart and Secure Online Shopping
With all the hustle and bustle and so many consumers shopping with credit cards during the holidays, it’s a great time for predators to strike. In fact, credit card fraud can increase by as much as 20 percent in November and December.
According to the National Retail Federation, more than half of all consumers shop online. With this in mind, here are five tips for using your credit card smartly and safely during the 2014 holiday season:
1. Avoid using a debit card online. Always use a credit card (some even have free fraud protection, and most have no fraud liability). If your bank account information is stolen from your debit card that money will come out of your account immediately, and recovering stolen funds is a hassle best to avoid. Also, Federal law prohibits credit card fraud victims from being responsible for more than $50 of the stolen funds.
2. Try to use the same credit card for all online transactions. This way if your account information is stolen, you won’t have to close multiple accounts and spend extra time tracking down suspicious activity on those accounts.
3. Avoid using public computers to make online purchases. Public computers are less secure, creating a greater chance for any of the personal or financial information you enter to be stolen. This same information can even be stolen when you use your personal laptop on a public wireless network. It’s better to make purchases at home on your own network and computer.
4. When shopping online, make sure you are shopping with trustworthy merchants who require security information such as address verification and the CVV2/CVC2 number on the back of your card. Check to make sure you are on a secure form before filling out any personal information. You can do this by looking for the “s” at the end of “http” in the web address. Also, avoid clicking on email links to any website. Instead, go directly to the real website by typing the web address in your internet browser.
5. Consider third-party payment processors for online shopping. For example you could use PayPal or Google Checkout to avoid putting your credit card information into various sites during the checkout process.
