Recession or not, Americans are out hunting for great deals on Christmas presents — and while they’re relying less on plastic, that doesn’t mean they’re not using their credit cards.
According to the National Retail Foundation, the average holiday shopper will spend $683 on gifts this year. Credit card spending will be down, but not out. Nielson Research says that 42% of Americans will cut spending this holiday season, and will rely less and less on credit cards for the gifts they do buy. The company says that over half of Americans will use their credit cards in December.
If you plan on using your credit card for the holidays, there are some rules to live by before you take the plastic from your purse or wallet.
Let’s have a look-see.
Avoid the store cards. We’ve all been there. The clerk at the check-out counter will inevitably ask you to open a store credit card and get 15% or 20% off of your purchase. The best advice? Take a pass. Invariably, store credit cards come with zero percent or low-rate introductory offers. But if you miss even one payment, that rate will shoot up and haunt your for moths, if not years. Better to pay cash or use a signature credit card.
Leverage those “return” policies. Many major credit cards will offer you return protection — meaning the card carrier will guarantee your purchase, usually up to 90 days after you buy your gift. Make sure you know what your card company’s policy is — and ask about their return policy. Three months is good protection for purchases that need to be returned — it’s much better than what retailers offer.
Avoid debit cards. While debit cards are great for your financial health (the money comes right out of your checking account, so it’s akin to using cash), it’s not such a great idea in terms of consumer protection. If your card is stolen, safeguards aren’t as strong as they are with credit cards. Most credit cards have solid anti-theft protection and are more reliable for heavier use in the holiday season.
Check for security seals. When you use a credit card to shop online, make sure you’re on a “secure” site before making the purchase. Usually the site will ask you to type in an encryption code before you cash out — that’s a good sign. It tells you your card is safe on the retailer’s site.
Another good idea: Make sure you check your credit limit before you go shopping. Credit card companies are taking a paring knife to card limits these days, and burying the news in your statement’s fine print. You don’t want to go over your limit — that will trigger rate hikes that might set your hair on fire. Also, if you bump up against your credit limit, the credit scoring agencies will penalize you with a lower credit score.
Above all, use common sense and build a budget before you take your card out shopping this holiday season. Make a list and check it twice, and don’t go over your budget’s spending limits. That way, January will be as pleasant a month as December — with a lot more money left in your pocket.
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