How to Hunt for Holiday Bargains -- and Avoid Credit Card Financing Gotchas

NEW YORK (TheStreet) -- Shoppers hunting for big bargains this holiday season could squeeze out even more savings with the choice of credit card they swipe at check-out time. Also, they might want to think twice before signing up for those "Ho Ho Ho" 0% financing offers many retailers are hawking to customers. 

That's the advice from CardHub, a firm that analyzes and compares credit cards and financing deals. The Washington firm compared more than 1,200 credit cards and came up with a list of cards that offer consumers the best bang for their buck, whether it's through attractive sign-up bonuses or special holiday deals.

Topping its list of the best credit cards for 2014 holiday shopping is the Chase (CCF)  Sapphire Preferred card, which offers 40,000 points when the card holder spends $3,000 in the first three months. This sign-up bonus works out to $500 in travel when redeemed through Chase Ultimate Rewards or a $400 statement credit. There's no annual fee the first year, but customers must cough up $95 a year after that.

The Capital One (COF)  Venture Rewards card and Barclays (BCS) Barclaycard Arrival Plus World Elite MasterCard  (MA) both offer a similar 40,000-point bonus for shoppers who spend at least $3,000 in the first 90 days. This bonus can be redeemed for a $400 statement credit for travel-related expenses. Both of these cards are free the first year, but the annual fee for the second year varies, with Capital One charging $59 and Barclaycard collecting an $89 fee.

For travel buffs looking for hotel bargains when they're visiting friends and relatives this holiday season, there's the Club Carlson Hotels Premier Rewards Visa Signature credit card. It offers a 50,000-point sign-up bonus with the first purchase and an additional 35,000 points for spending at least $2,500 within 90 days. The 85,000 points can be redeemed for up to 18 free hotel nights, depending on the category of hotel selected and number of consecutive nights booked. The card has a $75 annual fee.

The Hilton (HLT)  HHonors Surpass  credit card also offers an attractive sign-up bonus for frequent travelers. Card holders can get up to 12 free hotel nights through the card's 60,000-point sign-up bonus when they spend at least $3,000 in the first three months. The card has a $75 annual fee.

Credit cards offering the best ongoing rewards include the Citi (C) Double Cash card, which offers 2% cash-back across the board -- the highest rate among consumer cards. It has no annual fee.

The American Express  ( AXP) Blue Cash Preferred card offers 6% cash-back at supermarkets, 3% at gas stations, 3% at department stores and 1% on everything else. There's also a $100 sign-up bonus and free year of Amazon ( AMZN) Prime when the card holder spends at least $1,000 in the first three months. It has a $75 annual fee.

For shoppers who think they'll have trouble paying off  all those holiday purchases at once and want a reprieve from interest charges, the Citi Diamond Preferred MasterCard and the Bank of Hawaii (BOH) Visa Signature with MyBankoh Rewards card won't charge any interest on the balance for the first 18 months as long as the person makes the minimum payment by the due date each month.

For people wanting to lower their credit card debt, the Chase Slate card offers 0% interest on balance transfers for 15 months and doesn't charge a balance transfer fee during the first 60 days. Considering that the average household has roughly $6,700 in credit card debt, this perk could save some families considerable cash, noted CardHub.

For existing credit card holders who can't benefit from sign-up bonuses, many cards are offering special holiday deals, such as the Chase Freedom and Discover (DFS) cards, which are offering 5% cash-back on purchases at department stores between Oct. 1 and Dec. 31.

Citi's Price Rewind program offers a perk that ensures worried shoppers won't miss out on savings if an item is discounted further after they've purchased it. Once the item is purchased and registered at citi.com/pricerewind, Citi will search for 60 days for a lower price. If a cheaper price is found, the card holder is notified and reimbursed the difference in a statement credit of up to $300 per item.

For those looking for shipping deals, American Express is offering free two-day shipping and free return shipping on items at more than 90 stores through a complimentary membership to ShopRunner. It's also offering special 20% discounts when buying certain brands, such as LG, Apple (AAPL) and Beats and Conair's (CNGA) Cuisinart.

So what about all those retailers offering big financing deals out there -- the ones boasting 0% interest for a year or more? CardHub is warning people to be wary and to read the fine print carefully before signing on.

Many of these special financing deals sound peachy on the surface for shoppers who worry they'll be unable to pay off the entire purchase by the next credit card cycle. But CardHub cautions shoppers that many retailers slip "deferred interest" clauses into the fine print that could give shoppers a nasty surprise. Basically, it slaps interest onto the entire original purchase amount retroactively if someone misses a payment or even has a $1 balance when the promotion period expires.

As an example, let's say a shopper purchases a laptop and bicycle for $800. The buyer chooses a traditional credit card that offers 0% on new purchases for six months and a 20% regular interest rate after that. If the shopper pays monthly installments, but takes seven months -- instead of six months -- to pay it off, the person would pay interest on the remaining balance of about $115 in the seventh month. That would equate to about $2 in interest.

However, if this same shopper chose a deferred interest deal, the person would pay interest on the original amount and each monthly balance over the seven month period -- or about $55.

Among the retailers that sneak in a "deferred interest" clause into their financing offers are Dell (DELL) , J.C. Penney (JCP) , Walmart (WMT) , Sears (SHLD) , Staples (SPLS) , Best Buy (BBY) , Home Depot (HD) , Macy's (M) , Office Depot (ODP) , Amazon, RadioShack (RSH) , Victoria's Secret, Pottery Barn and Toys "R" Us, according the CardHub.

Retailers who don't have deferred interest clauses include Target (TGT) , Costco (COST) , Nordstrom (JWN) , Neiman Marcus, Kohl's (KSS) , Williams-Sonoma (WSM) , Dillard's (DDS) , Gap (GPS) , Ace Hardware and TJX (TJX) .

At the time of publication, the author held no positions in any of the stocks mentioned. DISCLOSURE REQUESTED

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


 

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