Smart Holiday Shopping Tips for 2017

Plan carefully so credit card debt or identity theft can’t dampen your holiday cheer!

How many credit cards should someone have for holiday spending?

As we mention in the video, credit cards can be an extremely useful tool during the holidays. However, they also make it easier to overspend and amass high interest rate debt that’s tough to pay off. But when used correctly, you can maximize the rewards you earn while you minimize interest charges and the risk of debt problems.

Use these tips to help you avoid a holiday debt hangover in the New Year.

#1: Start with zero balances

Credit card rewards are quickly offset by interest charges brought on by high credit card APR. However, there is a way to use credit cards interest-free. If you start a billing cycle with a zero balance, then pay off all the purchases you make within that billing cycle, no interest charges apply. So, in order to ensure the 3% cash back that you earn isn’t offset by 20% APR, you must start and end the billing cycle at zero.

If you don’t do this, interest charges will offset any rewards earned within 2-3 billing cycles, depending on your APR. In this case, it doesn’t make sense to use a rewards credit card. You don’t actually earn anything overall and they tend to have higher interest rates. That means it will cost more money to eliminate the debt.

#2: Aim for low APR if you won’t pay off the balance quickly

If you purchase a big-ticket item that will take some time to pay off, don’t use a rewards credit card. The same is true for making a series of purchases that will need to be paid off over time. If it will take more than 3 billing cycles to pay off a debt, don’t bother with a rewards credit card. Instead, opt for your credit card with the lowest APR. That way, it will cost you less money to pay off the debt as you work your way back to zero.

#3: Be strategic with your rewards cards

If you plan to travel for the holidays and have a travel rewards card, use it to book reservations so you can earn miles. If you have cash back or point rewards cards, use them strategically and only when you can pay off the balances quickly. Check the rewards program and only use the card when you can earn the maximum rewards.

#4: Consider using PayPal or prepaid for online shopping

More and more, people are opting for online shopping instead of hitting the store. But the busiest online shopping season of the year also means it’s the worst time for identity theft. The last thing you need on top of your holiday spending is the hassle of dealing with identity theft. But there are some easy ways to mitigate or at least minimize that risk.

One way is to use and online payment processing service like PayPal. If a retailer gets hacked or your transaction isn’t secure, the thief still can’t access your PayPal unless they also have your login and password.  Even if they do, they only have access to the funds loaded on your account. If you keep this amount limited, then it also limits your risk.

If you don’t use PayPal, consider getting a prepaid credit card. This is a card that functions like a debit card. You load the card with funds and then purchases are deducted from that amount. The difference between prepaid credit and debit is the liability you have if someone hacks your account. With a credit card, liability is always limited to $50. However, with debit, the liability limit depends on when you report the theft.

  • If you report it within two days, it’s also $50.
  • However, if it’s after two days but within 60 days, that jumps to $500.
  • And if you report the theft after 60 days, there’s no liability limit. In other words, you could be on the hook for the entire theft

This is why you should never shop online with a debit card. It’s usually just not worth the fraud risk. Prepaid credit is best because you have limited fraud liability PLUS the thieves can only drain the funds you have loaded on the card.

More resources

Download Consolidated Credit’s holiday spending worksheets:

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