Do’s and don’ts of holiday shopping with a credit card

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It’s that time of year again: gift-giving season. Though purchasing presents for loved ones can be a great way to spread joy and express gratitude for one another, it’s important to set spending guidelines so that you don’t stunt your overall financial goals in the process.

“The holiday season should be about empowerment,” says Jason Ray, financial planner, founder and CEO of Zenith Solutions. “Financially, consumers should not lose focus on their broader mission to create long term wealth.”

Here are a few do’s and don’ts you should consider while completing your holiday shopping this year.

Do: Keep receipts

We’ve all thrown away receipts thinking we’ll never need them. But if you experience damage, loss or theft of an item, the card you bought it with will likely need a receipt of purchase to activate a purchase protection perk.

For example, American Express requires a receipt to claim lost items. Coverage is limited up to $1,000 per item and $50,000 per calendar year, and in most cases, you must file a claim for your lost item within 120 days from the date of purchase.

If your item has been stolen or damaged, rather than lost, additional steps may be necessary. Amex requires an incident or police report for stolen items, and items that are damaged must be mailed to the AMEX Assurance Company as proof (shipping is reimbursed).

Do: Use 0% APR offers for large purchases

Should you plan to make a large purchase this holiday season and don’t have the immediate funds to do so, it may be in your best interest to use a zero percent intro APR card.

Cards like the Capital One® Quicksilver® Cash Rewards Credit Card offer long introductory APRs on purchases so you can avoid paying interest on a gift for an extended period. The Quicksilver gets you a zero percent introductory APR offer on purchases for 15 months (15.49 percent — 25.49 percent variable APR thereafter), meaning you won’t pay interest on your purchase for well over a year.

When choosing a zero percent APR card, make sure the rewards structure, annual fee and any other perks will be valuable to you once the introductory APR offer has passed. Otherwise, you’ll be stuck with a card that does little more than sit in your wallet.

Try to avoid overspending for the sake of an introductory offer. The perk only lasts so long, and after it’s over, you’ll have to start paying interest in addition to your monthly payments.

Do: Save money wherever you can

Budgeting for extra spending on gifts might be a pain, but it’ll be worth it in the long run. Ray suggests starting to save now if you plan to make large purchases for the holidays.

“[Your] monthly budget for November and December should place more of an emphasis on gift getting and taking advantage of holiday deals versus going out to eat at restaurants, traveling, or other typical expenses that consumers incur during the year,” says Ray.

It also doesn’t hurt to get a little help finding the best online deals. Free browser extensions like Honey and Shoptagr scour the internet for discount codes and apply them at checkout. These services are similar to using coupons, but without having to find the coupons yourself.

Extensions like The Camelizer can be added to your browser and help you view the price history of an item you’re looking to purchase. If you notice a heightened price, you can shop elsewhere or hold off on purchasing the item until after the holidays.

“If you’re flexible on timing, consider purchasing the gift before or after the holidays to take advantage of sales and various discounts,” says Jay Abolofia, financial advisor and founder of Lyon Financial Planning. “The less time-crunched you feel the more likely you are to make a thoughtful purchase within your budget.”

Don’t: Max your budget for the sake of rewards

You might have (or be looking to obtain) a new rewards credit card with a hefty welcome bonus. Though the bonus may be tempting, it’s important that you don’t overspend to reach it — doing so will most likely add more to your plate to pay off after the holidays are over.

According to TD Bank’s 2018 Merry Money Holiday Spending Survey, 63 percent of consumers said impulse purchases kept them from sticking to their holiday budget.

To keep yourself from overspending, follow a shopping list rather than winging it or purchasing whatever catches your eye. You can also take advantage of traditional holiday shopping days that are known to offer a wide variety of discounts, like Black Friday and Cyber Monday.

Don’t: Get a store credit card

Many department stores will offer a discount at checkout only available to those who sign up for a store credit card. Though it may be tempting to save an extra 30 percent on your purchase, we generally advise against doing so.

“Store credit cards can be valuable for stores that consumers frequent. However, we advise our clients to use credit cards that earn general rewards for each dollar spent (no matter the category). The reason being we don’t want our clients to be encouraged to spend on retail items,” says Ray.

Some rewards cards offer points or cash back for department store purchases, like the U.S. Bank Cash+™ Visa Signature® Card. For no annual fee, you’ll have the chance to choose 2 categories from a list of 12 to earn 5 percent cash back in each quarter (up to $2,000 in combined purchases), including department stores, select clothing stores, electronic stores and sporting goods stores (then 1 percent).

Don’t: Save payment information on websites

Saving your debit or credit card information may speed up your ability to make purchases online, but it can also make it that much easier to purchase items you don’t necessarily need.

An October 2019 survey from Bankrate Credit Cards found that millennials save their financial information online at higher rates compared to other generations. Millennials also reported higher rates of impulse purchasing in the past month and year compared to other generations.

This data suggests that saving payment information online can lead to impulse buying, most likely due to the simplified checkout process. It can also put you at risk for credit card fraud — especially if you’re online shopping on an unsecured Wi-Fi network.

The bottom line

As you begin your holiday shopping, keep these tips in mind to ensure safe and financially responsible spending.

  • Store your receipts in case of loss or theft of an item purchased with your credit card. Make sure to keep any damaged items, as well.
  • Consider a zero percent APR card for large holiday purchases.
  • Save extra money wherever you can with free browser extensions and off-season gift purchasing.
  • Avoid overspending for the sake of a credit card’s welcome bonus.
  • Steer clear of store cards. Instead, look into credit cards that reward you for department store purchases.
  • Forgo saving financial information online to prevent impulse buying and theft.