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 wonder if it would be easier to charge everything to a credit card.

But is that a good move? What effect will that have on your credit score, budget, or plans for larger purchases next year?

Christine Samples, Banking Center Manager with First Merchants Bank, has some advice.

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.

“I always tell my clients to examine their personality when it comes to money and spending,” Christine shared. “Are they good at managing bills, stress, and budgets? Do they make payments on time? Is their budget already maxed out? Do they have experience managing credit cards or loans?”

You know yourself and your finances best. If you already struggle with credit card debt, consider other options, as it could introduce extra stress and strain on your finances.

Christine also recommends having a good grasp of how credit cards can affect your credit score and your overall financial stability before deciding to purchase gifts on credit.

"I just see how much trouble it can get people in -- especially younger people who are just establishing themselves," she explained. "So, I really want folks to understand how this can impact them and to be confident in their choice and ability to manage additional debt."

If you do decide to put your holiday gifts on a credit card, Christine cautions you to be selective and choose the card that's right for you.

Take Advantage of Promotions

That can include signing up for a new card with a current promotion – something Christine says you should plan to "shop around" for.

"Some cards will have 12 months, 18 months with no interest," she explained. "That can be a good option for someone holiday shopping – especially if that promotion also includes balance transfers. So, if you’re paying on multiple cards with higher interest, you could switch your balances over to the new card and take advantage of that interest-free promotional rate in addition to checking off your gift list.”

Use Rewards Cards

Christine also recommends selecting a card with special rewards or perks for purchases. However, she suggests using that cash back as a statement credit instead of trading in your rewards.

"If you do that, it's like getting a free thing," she explained. "So, if you purchase holiday gifts on a rewards card and get $75 back – when you apply that as a statement credit, essentially one of those gifts was free."

For customers who are planning to use a credit card frequently, having a rewards card really pays off.

"If you choose a credit card with a special cashback promotion, you could get a statement credit right off the back, pay zero percent interest, and then add additional cash back rewards as a statement credit," she explained. "In that scenario, it's almost putting yourself at a disadvantage by not using a credit card."

Avoid Store Credit Cards

However, Christine cautions against using a store credit card for holiday shopping.

"Every time you apply for a store credit card, they're doing a hard pull on your credit," she explained. "Every time you do a hard pull, it will lower your credit score. So, if you're out shopping and apply for a store credit card here, and a store credit card there – that can put a very large dent in your credit score very quickly."

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.

“Your credit card limits are counted towards your debt-to-income ratio, even if you don’t have a balance on them,” Christine said. “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.

"So, if you're applying for a clothing store credit card because they'll give you 40 percent off this one time, for the holidays, you need to consider whether that's actually worth it in the long run," Christine said. "In my personal opinion, it's better to have a major credit card – one that's not affiliated with any store, that's going to give you rewards points, that's going to pay you back, that you can use anywhere. It's really being picky and choosy about what cards will best serve you."

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 selecting 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!