Using credit cards for your gift shopping is almost a holiday tradition in itself. Unfortunately, many people not only underestimate how much they spend for holiday purchases, but then don’t pay off their holiday purchases when the credit card bill arrives in January. The end result is a mountain of debt. According to a Consumer Reports holiday shopping survey, 14 million shoppers are still paying off debt from the 2010 holiday season.
THE DECISION TO SHOP (OR NOT)
How do we get ourselves into this vicious credit card situation? There is a real retail effort to promote November, December and January as the “season of giving” to encourage consumers to go big or go home. It’s not good enough to sit around with your family and reflect on the reason for the season. We are compelled to buy $100 sneakers and $500 electronics and even luxury cars with big red bows to show how much we care.
First, it’s important to realize that the decisions you make about your purchases are entirely yours. Don’t feel pushed to buy things that are outside your means simply to impress others or make yourself feel better. If you are sure about your decision to spend, and your credit scores are good, you can leverage various credit card promotions to get rewarded for the things you do buy to stretch your holiday budget.
KNOW YOUR CREDIT CARD BONUSES
There are all different kinds of credit card offerings: Some involve cash back. Others offer rewards for spending or frequent flier miles. Some offers have free balance transfers or an interest-free period. Some of these offers are reserved for new credit card accounts, which would mean that you’d have to apply for a new card. Before you apply, understand the financial terms ) especially if your credit score isn’t perfect. Here’s just a sample of credit card offers. (More can be found on creditcards.com )
|Chase Sapphire Preferred
|•Cardholders can redeem bonus points/miles for cash.
•Cardholders also get double points on travel and dining charges.
|Chase Freedom Visa
|•New cardholders get a $100 cash back bonus after spending $500 within the first three months
•No annual fee
•APRs range from 15.99 to 22.99
|Citi Dividend World MasterCard
|•0% purchase APR for 15 months
•5% cash back on key gift-giving expenses categories through the end of the year
•$100 bonus for spending $500 in the first three months.
•No annual fee
|Citi Platinum Select MasterCard
|•0% interest rate on transferred debt for 21 months.
Capital One Venture Card
•Earn 2 miles for every $1 that you charge
|Blue Cash Preferred American Express
|•$150 after spending $1,000 within the first three months
•6% back from grocery stores and 3% back from department stores. These cash back categories are permanent
•Also offers a 6- or 12-month 0% introductory APR (depending on the applicant’s credit score).
|BankAmericard Cash Rewards
|•New customers qualify for $50 in bonus cash back when they spend $100 within 60 days of opening the account
•Earn 2% cash back on groceries and 3% cash back on gas station purchases up to $1,500 per quarter
•Earn 1% cash back on all other purchases made with the card
|Upromise World MasterCard
|•Earn 11% cash back for college when doing holiday shopping online through Upromise.com through Dec. 31.
•That 11% cash-back holiday promotion is in addition to cash-back offers of 10 percent or more available regularly online from Upromise retail partners
LEVERAGING YOUR CREDIT CARD REWARDS
Having a shiny, new credit card in your pocketbook for the sole purpose of reaching the spending goal in order to get the cash back is not a solid strategy. One of the most difficult parts to master is the stopping of the shopping. Think about it: There is a reason that stores give out gift receipts: So you go to the store to return a gift and leave the store having spent a few extra dollars. So you must learn to only shop as much as you budgeted for, and stick to it. Using credit cards as a financial tool takes practice and restraint, but if used strategically, you can make them work to your advantage.