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Shoppers to use credit cards less

By Leslie McFadden · Bankrate.com
Tuesday, November 16, 2010
Posted: 2 pm ET

More Americans will pay for holiday purchases this year with cash or debit cards while fewer consumers will whip out their credit cards. That's according to the National Retail Federation's 2010 Holiday Consumer Intentions and Actions survey, which was conducted by BIGresearch and released today. More than a quarter of shoppers -- 27.6 percent -- will pay for gifts with credit cards this year, the lowest amount since 2002, when 26.8 percent of shoppers plan to charge holiday expenses. About 43 percent of shoppers will use their debit card primarily, a 20 percent increase from 34.3 percent in 2005. In addition, 25.7 percent will pay with cash, up slightly from 24.9 percent last year.

Many that plan to use credit cards will increase their spending during the holidays. According to the results of a recent myFICO holiday e-mail survey, almost half expect to charge an average of $100 to $500 more than usual during the holidays, and more than half said they don't prepare at all for the surge in spending.

If you personally plan to rely on credit cards this holiday season, here are some tips on how to keep your spending within reason.

  • Plan your expenses using this holiday spending work sheet. For ideas on how to control the increase in bills, check out the Bankrate article, "7 uncommon ways to save for the holidays."
  • Know that store credit cards may offer an attractive sign-up discount but also come with sky-high interest rates. A study recently released by Rep. Anthony Weiner, D-N.Y., found that store credit cards from 35 major New York City retailers offered an average interest rate of 23.83 percent -- nine percentage points higher than the average rate for bank credit cards. If you know you'll pay your holiday purchases off over a few months, it makes much more sense to get a low interest credit card that offers a zero percent introductory APR.
  • Make use of holiday cash-back and reward offers from credit cards already in your wallet. For instance, from Nov. 14 through Dec. 20, Chase credit cardholders with access to the Ultimate Rewards program who redeem 5,000 points or more in a single transaction on merchandise will receive a free Best Buy gift card as a bonus -- a $10 gift card for 5,000 points or a $25 gift card for 10,000 points. Check with your card issuer for promotions that can translate to savings. Just make sure you don't actually spend more than you planned to in order to "save."
  • Cash out your rewards points or dollars on your rewards and cash-back credit cards. You may have enough rewards to redeem for a gift card or cash you can use toward a present.
  • If your budget is tighter than skinny jeans this year, check out these 12 gift ideas that won't break the bank.

What method of payment will you rely on while holiday shopping?

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