Don't be paying for this Christmas a year from now

Credit Card Tips for Holiday Shopping

by Bill Hardekopf

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Holiday shopping has begun, but millions of Americans are still paying for last year's holiday shopping according to a survey by Consumer Reports. The presents may have been forgotten, but the debt and interest payments live on and on.

It is too easy to get caught up in holiday shopping and pay for everything with a credit card. Credit cards allow the immediate joy of buying and giving but put off the pain of payment. The fact that so man Americans are still paying off last year's presents shows that this can be a painful and costly cycle. Many of us probably don't even remember what we gave last year, but millions are still paying for it.

Paying with a credit card can not only add interest to the cost of the item, but it also makes it easy to overspend. In the 2009 holiday season, those who used credit cards for gift purchases spent an average of $896 on gifts, 10% more than the average of $811 (Consumer Reports). A Dun and Bradstreet study several years ago showed people spent 12-18% more when they paid with credit cards instead of cash.

No matter how much discipline we think we have, paying in cash is the most effective way to reduce impulse purchases. Handing over dollars makes the payment real. You worked hard for that cash and it is sometimes difficult to give it to someone else.

Tips for Holiday Shopping with a Credit Card

  • If you can't afford to pay off your credit card balance in November, then you can't afford to add a lot more to it.
  • Set a spending limit and change your shopping habits now before you get into the spirit of the season.
  • Verify your credit limit before you shop. If purchases push you close to your credit limit, this increases your debt utilization ratio, a major component of your credit score. Holiday shopping could cost you even more if your credit score drops and your interest rates go up. The goal is to keep debt utilization under 30%.
  • Start saving now for the January credit card bill. Look at what you spent last year. If you are still paying that off, then you should reduce spending this year. If you must use a credit card to get through the holidays, make sure you can pay it off in three to six months.
  • If you carry a balance on your credit card, try to get the lowest rate possible. Contact your issuer and ask for a lower rate. It may be time to shop for a card with a lower rate or a long introductory period that lets you transfer a balance and pay 0% interest for at least 12 months. If you transfer a balance, pay attention to the balance transfer fee, do not use it for new purchases, and pay your credit card bill on time every month.

Credit Card Benefits for Holiday Shopping

If you pay your credit card bill completely each month and do not carry a balance, then you might actually earn some additional cash by using your credit card for holiday shopping. Here are some things to look for in order to benefit during the holidays:

  • Pay attention to partner programs. Most credit card issuers have a partner program that offers discounts or bonuses for online purchases with certain companies. The program varies by issuer, but the partners could be stores where you already shop.
  • Use your rewards points for holiday shopping. These can be used to buy gift cards with many retailers. You can also use your American Express Membership Reward points to shop at to pay in full or for part of your purchase.
  • Look for 5% rotating cash back offers. Chase Freedom, Discover More and Citi Platinum Select offer an attractive 5% back on the spending on designated categories for a specific amount of time. If you have these cards, remember to sign up for these attractive rebate offers each quarter.
  • Check out any spending bonus opportunities. Discover More and Chase Freedom offer spending bonuses for new applicants who reach a set spending limit. Holiday shopping is the best time to quickly reach these limits and then use the bonus to pay off your balance.
  • Credit cards also provide extended warranties and purchase protection, which can provide a little extra coverage for holiday gifts. Many issuers will even refund the price difference if you find a lower price on the same item from the same manufacturer within a designated time period (typically 60 days).

Updated November 2013

Bill Hardekopf is CEO of, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.

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