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Holiday credit card splurge could cost you big time

Running up your credit card bills could be extra costly this year as card issuers scramble to change many terms before federal rules restricting their practices take effect in February.

They're raising annual percentage rates, instituting fees, slashing credit limits and even closing some accounts, all of which could put consumers who carry large balances in a bind.

Consumers "need to really think twice about how they're paying for the holidays this year," said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. "If you're planning on carrying a balance and you're going to charge up a bunch of things during the holidays, today's (credit card) terms may not be tomorrow's terms."

Translation: The purchases you make now and in December could have a higher annual percentage rate in January.

The good news is that many consumers plan to pay for their purchases with cash or debit cards and avoid credit cards.

If you do use a credit card, don't charge anything that you can't pay off in three months.

"Credit card rates are now too high to just charge something and assume you will be able to pay for it," said Bill Hardekopf, chief executive of LowCards.com, a credit card information Web site.

Don't even think about just making the minimum payment.

"If you charge $1,000 on a credit card with an interest rate of 15 percent and just pay $25 of your balance each month, it will take you until May of 2014 to pay off this Christmas, and you will pay an additional $370 in interest," Hardekopf said.

"If your APR was recently increased and you carry a balance, leave that card at home so you won't charge anything more on it."

Pay in cash or through a debit card. But if you use a debit card, keep track of your spending and your bank balance so you don't overdraw your account.

"It's really hard to outspend the cash you have," Mark said. "You can't have $600 and end up spending $1,000."

Studies have shown that consumers typically spend 12 percent to 18 percent less when they pay with cash, Hardekopf said.

"Counting out and handing over cash is a sobering reminder of how much items really cost," he said. "It makes you pause and consider if the purchase is really worth your labor."

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