Whether consumers are finished, in the midst of or just starting holiday shopping, chances are they used a credit card for some of their holiday purchases
Whether consumers are already finished, in the midst, or just starting their holiday shopping, chances are they used a credit card for some of their purchases this year. According to a TSYS study on consumer payments in 2016, 40 percent of consumers preferred paying with credit cards over debit cards or cash.
There are a lot of questions and misconceptions around credit cards due to an overwhelming number of options and benefits each card offers. In addition, each consumer’s financial situation is obviously different, meaning different credit cards will benefit some more than others.
Should I Use A Credit Card?
Other than the convenience, consumers may use a credit card for their holiday purchases so that they can take advantage of rewards and benefits as they spend.
This year, the average American is projected to spend $906 during the holiday season, according to World Atlas. These purchases can potentially earn plenty of reward points on a consumer’s credit cards. Rewards usually come in the form of cash back or points earned as the consumer spends.
Depending on the issuer, the benefits vary from card to card. Consumers should check with their current card issuers to see which benefits they are eligible for. Some examples of benefits include cash back on purchases, extended warranties, insurance, and price and return protection policies on select items. Price protection, for example, could come in handy if you just bought something and see it offered at a discounted price somewhere else — your credit card company may pay you the difference.
Consumers with mediocre to poor credit can also benefit by using credit cards during the holidays. Holiday spending with credit cards can be viewed as a great way to build credit for the future.
Regardless of credit score, credit card users should make purchases responsibly as they enjoy these potential benefits. It’s important to pay the credit card bill on time and in full every month. Late payments can stay on credit reports and lower credit scores for seven years as stated by AAA credit guide. By paying in full every month, it’s also easy to avoid expensive credit card interest, which can outweigh any benefits and rewards consumers receive by using their cards.
Are Credit Cards Safe?
Overall, credit cards are safe to use and can even offer an added sense of security in the purchasing process. A large number of credit cards come with built-in fraud protection with no additional fees.
Under federal law, most credit cards are capped at around $50 liability for fraudulent charges as seen on Legal Information Institute’s website. However, CNN states that with a debit card a person could be responsible for $500 or more, depending on how quickly it is reported.
What Credit Cards Should I Use?
The answer depends on the consumer. It’s very important that consumers make the most out of their rewards by picking cards that fit their preferences, lifestyles, and financial situations.
For example, Credit Card Insider shows that the American Express Platinum card has a high annual fee, but offers benefits for consumers who travel frequently, like rewards on travel expenses as seen on Credit Card Insider. When these benefits are maximized, the benefits can offset the annual fee for consumers.
However, if consumers would prefer a card without an annual fee that still offers rewards like getting cash back, the Blue Cash Everyday card could be a good fit. This card rewards consumers for using it for purchases at places like the supermarket, department stores, and on gas. The rewards are not as fruitful as a card with an annual fee, but may be a better fit depending on a consumer’s credit situation.
Examples of good credit cards for people with fair to no credit are the Deserve Classic, Edu and Pro credit cards. According to Credit Card Insider, these cards are designed to give people with some, little or no credit history the chance to start building and improving their credit. These cards have little to no fees and can offer basic rewards. They can also be a great way to establish credit.
Should I Sign Up For Department Store Credit Cards?
This answer can also depend on each individual consumer. Despite a bad reputation at times, there are plenty of store credit cards out there that are really beneficial for the consumer.
The NHS Consumer Law Center explains that department store credit cards do have a higher interest rate than regular credit cards. If consumers cannot pay their purchases in full each month, they will see large interest fees start to accumulate. The cost of interest will quickly outweigh the value of any rewards earned from purchases.
Consumers should check their current credit cards to see if the rewards from purchases at the department store outweigh any rewards the department store’s credit card offers. If the consumers can earn more from a regular credit card, they should strongly consider using their existing cards.
Using a Credit Card This Holiday Season
Finding the right credit card can allow consumers to make the most out of their holiday shopping. Before signing up, consumers should research and decide what cards fit their individual needs best, whether it’s earning points for travel or getting cash back. Credit cards can provide different benefits, rewards, safety and a foundation for the future as consumers build their credit. Using credit cards responsibly during the holidays can provide great value to consumers well beyond the season.
Credit Card Insider is a privately held, Syracuse, New York-based consumer education company. The company provides reviews of credit cards, information about building credit, and tools to compare credit card products.