Managing Your Credit This Holiday Season

American credit card debt has hit an all time high. Below are five strategies to avoid the credit card trap this holiday season.

Step 1. Limit Your Credit Cards to Two Cards

This may sound like a simple strategy but limiting yourself to two credit cards is an easy way to make sure your spending does not get out of hand. I routinely turn down credit card offers for clothing stores, discount stores and department stores. For most people, it's too big of a temptation to have so many cards in their wallet and the end of the month occurs with too many bills and too little cash. If you currently have more than 2 cards with outstanding balances, start a plan to cut the debt down to only 2 cards. I carry a Visa card and a Lowes card and my card debt has decreased tremendously. Just five years ago I had 8 different cards. It's much easier to manage with just two cards. Don't fall for the 10% discount trap, let the company keep their credit cards and you'll keep more of your cash.

Step 2. Limit Your Credit Card Allowable Balance

Just because you qualify for a $15,000 credit card balance doesn't mean you should have a $15,000 balance. Credit card companies try to entice you by continually increasing your credit limit. Call the credit card company and lower the balance to a level you would feel comfortable carrying. Of course you should pay your balance off every month, but this strategy helps keep you honest. By setting your own card balance limit, you are in more control of how much debt you are willing to carry.

Step 3. Sign Up for Credit Fraud Alerts

Credit card fraud and identity theft can create havoc on your credit ratings. Companies like Washington Mutual offer credit protection services for a small $10 a month. Many of these services will monitor your credit reports, give you your credit scores and alert you to any changes in your ratings. In addition, these services will let you know about any new credit applied for in your name.

Step 4. Use Your Debit Card At Restaurants, Gas Stations and for Travel

One of the most expensive meals your ever pay for is a meal out with friends, put on a credit card and then not paying off the balance each month. Get in the habit of using your debit card to pay for gas and for travel purchases as well. This strategy will keep you from racking up large balances on your credit cards.

Step 5. Avoid Extravagant Gift Giving

As we head into the holiday season, realize that buying expensive gifts and charging them to your credit card is never a good idea. If you have the funds to pay the card off it's fine, but if you know come January you will be looking at a large card balance for the next several months then do yourself and your loved ones a favor and opt for a more reasonable gift. It truly is the thought that counts and the two minutes of joy you may feel in giving an extravagant gift this holiday will not be worth the months of financial trauma. A low self-esteem is the main reason we feel the need to spend more than we have on gifts. Remember that your friendship is the true gift and that doesn't cost a thing. The best things in life really are free.