Falling into the trap of spending too much on credit cards during the holidays is never good for your wallet, but using credit cards wisely when you shop for the holidays can be very helpful.
If you already have a lot of credit card debt, it might not be in your best interest to buy holiday gifts on credit. On the other hand, if you've been careful with your spending and want to pay with a credit card, here's how to get the most out of it this holiday season.
Set a budget for the holidays and stick to it like melted candy canes!
Credit cards have gotten a "bad name" because they are often used in bad ways. People get carried away with the power of easy cash and sometimes forget it's money that has to be paid back, or at least they don't think about how much they'll pay for each purchase after interest is taken into account.
Find out how much money you can spend on gifts for the holidays. You should be able to pay back the money you put on your credit card within a month or two, so that your interest rates stay low and you don't end up with a costly debt that lasts for years.
Use a credit card with cash back or rewards.
Using a cash-back or rewards credit card is one of the best ways to get the most out of holiday shopping with a credit card. The holidays are often a time when you spend a lot of money in a short amount of time, much more than you normally would. This type of credit card lets you earn more rewards when you do this. Rewards credit cards work by giving you a percentage of your purchases back as a credit on your statement or as points that you can use to get merchandise, discounted items, airline tickets, hotel discounts, or rental cars.
During the holiday season, many credit card companies offer special cards with bonus rewards programmes. For example, many cards have higher cash-back percentages in November and December, or they may give you double cash-back rewards for the first 5 months after you open an account. These cards will help you get the most out of your Christmas shopping. It's like saving money on everything you buy without having to deal with coupons or sales ads.
Avoid irritable store clerks who try to sell you a store credit card.
During the holiday season, store cashiers should really push their in-store credit deals. They'll give you 10-15% off "today's purchase" if you sign up for a store credit card to pay for it. Doesn't that sound great? Saving 15% on that day's purchases right away.
Almost all department store credit cards have very high interest rates, which is a shame. You might save 15% on a $100 purchase, but the interest you'll be charged could be as high as 25%. If you don't pay off the bill in full as soon as it comes in the mail, you end up paying more in interest fees than the 15% you saved. When a store offers you a discount if you sign up for a credit card, you should ask what the interest rate is. If it's more than the discount, just skip it and use your rewards credit card or pay cash. That way, you'll know you've avoided high interest, an inquiry on your credit report, and an extra line of credit, which can lower your credit score (even if you pay on time!)
