Christmas Tip For Consumers: Stay Out Of The Red

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In December, many people put red and green together to make their homes look more festive. But financial advisers say that when heading to the mall, shoppers would be wise to stick with the green — and stay out of the red.

Consumers who use cash in December are more likely to avoid debts, fees and interest payments in January.

Such warnings may not be having much of an impact, according to Michele Raneri, an analyst with Experian Information Solutions Inc., a firm that studies credit card use. Raneri said consumers have been piling more debt on their department store credit cards throughout the recession.

Overall, the total amount of credit card debt is down about 8 percent. But the total is lower only because card issuers have shut down so many risky accounts, or consumers themselves have cut up cards. "Lenders are tightening up, and consumers are closing accounts," she said. "And fewer new accounts are being opened."

As a result, credit card accounts are down 18 percent, which makes debt appear to be declining, she said.

But for the individuals who still have open credit accounts with retailers, debt is actually growing. The most recent reports show the average balance per consumer on a single department store credit card is $198. That's up about 17 percent from last year, she said.

Raneri said the data suggest many people are using their store cards more because they don't have a lot of room on their bank cards for additional debt. For example, they may use a department store credit card to buy Christmas presents, and then switch to a general-purpose bank credit card to pay for lunch. That strategy helps spread debt around to avoid hitting credit limits.

People who want to open or close credit accounts should be careful about how they do it, she said. "If you open a lot of cards, you look credit-needy," she said. "But you don't want to close a lot of cards suddenly, either" — because that could trigger warnings that the cardholder has become financially strapped.

Either way, consumers risk damaging their ability to get credit if they need it. "Slowly make changes — any drastic changes could affect your credit rating," she said.

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