Using Credit Cards Wisely This Holiday Season  

According to the 2024 MarketWatch Holiday Shopping Survey, 61% of Americans plan to increase their holiday spending in 2024 compared to last year, with 67% relying on credit cards. While warnings about the risks of holiday credit card debt abound, avoiding credit cards can be impractical.  

Make no mistake, credit card debt is a serious problem – a problem that a holiday shopping spree can only further exacerbate. In fact, 12% of Americans are still paying off debt from the 2023 holiday season, according to MarketWatch’s figures. If you’re unsure about paying your next bill, consider sticking to cash or debit cards. 

Still, a lot of us will use credit cards this holiday season, largely because of the convenience, rewards and purchase protections they offer over other payment methods. The key is learning to use them wisely and that means understanding that carrying revolving credit can negatively impact your credit score. However, if you pay the balance owed on your credit cards every month, you may improve your credit score.  The most important thing to remember is to spend only what you can afford to pay on your card. With these things in mind, here’s a look at some advantages of shopping with credit cards and how to stay on track when using them this holiday season. 

Security 

If you lose cash, it’s likely gone for good. But if your credit card is lost or stolen and you report it immediately, you’re typically only liable for up to $50 in unauthorized charges – and many major card companies may waive that.  

Credit cards can also be a safer option when shopping online, which more and more of us are doing. MarketWatch reports that 53% of Americans will split their holiday spending equally between online shopping and brick-and-mortar stores this year. Cash isn’t an option for online shopping, leaving credit and debit cards as the only practical payment choices.   

Credit and debit cards might look alike, but there are some differences. Credit card transactions may offer more options for protecting your purchases under the Fair Credit Billing Act (FCBA). For example, if you spot fraudulent transactions on your credit card and report them promptly to your credit card company, the card company will investigate the fraud and refund the amount of the transaction.  Some companies may credit your account right away. 

Convenience 

Let’s face it, many of us find that credit cards are just easier to use. Credit card statements (either hard copy versions or those available online) provide a record of your transactions, which can simplify expense tracking and holiday budgeting.  

Cash back and rewards 

American consumers love rewards cards, and it’s easy to see why. Unlike cash, rewards cards have a variety of options including earning cash back, points or miles on purchases you’re making anyway. Different cards have different perks so you should check your cards to see if there are any rewards or benefits to keep in mind.  According to a survey from Motley Fool Money, 68% of Americans hold at least one cashback card, while 32% and 27% have at least one travel reward and gas/groceries rewards card respectively. When planning your shopping, check to see what rewards might be available through your credit cards, so you can use them to your advantage.  

Some cards offer such protections and benefits as:  

• Extended warranties. Depending on the card, you may be able to extend your original manufacturer’s warranty by one to two years.  
• Purchase protection (for stolen or damaged purchases). Coverage limits and time frames vary by card.  
• Return protection.  Some cards will allow returns beyond a retailer’s policy or secure a refund even if the retailer refuses to accept returns. This typically applies for 60 to 90 days after purchase.  

Not every credit card offers all or even some of the above perks, while some cards offer other valuable benefits that cardholders might not even know about. 

To find out the rewards and benefits for your credit cards, just log on to your online account and review your benefits. Alternatively, you can call the number on the back of your card or check your Cardmember Agreement. But whatever your rewards are, remember to stay on track.  Be smart when using your cards and try to avoid carrying a balance since that may impact your credit score negatively.  

How to avoid racking up credit card debt during the holiday season 

Paying off your bill is the key to avoiding high-interest charges. Many cards offer a grace period before interest is charged for purchases, so always try to pay in full by the due date on your statement. If you can’t pay in full, try to pay as much as you can afford.  

Open a dedicated banking account like a Christmas Club account 

A Christmas Club account is a stress-free way to save for holiday expenses and avoid new debt and provides a way to set aside money specifically for holiday shopping. You can still buy gifts with a credit card but use your Christmas Club account to pay off the bill.  

Shop with your credit card select merchants for discounts or higher rewards 

Many credit cards offer special programs. These programs allow you to earn higher cash back or receive discounts from select merchants. Check to see if your card has offers you can access during the holiday season.  

Use cash back or rewards you’ve already earned 

Twenty-three percent of cardholders didn’t use their rewards according to the 2023 CreditCard.com report. Of those, 51% were waiting for a specific redemption opportunity, while others cited lack of time, low redemption values or confusing rules. If you’re confused about how to collect your rewards, reach out to your credit card company for assistance.  

If you’re among the savvy majority who redeem rewards, use them during the holiday season. This way, you’ll maximize their impact and reduce expenses when you need it most.  

Conclusion 

When used wisely, credit cards can offer security and convenience. Many also provide rewards like cash back, points or miles, as well as benefits such as purchase protection, extended warranties and more. With a debit card, the money you used for your holiday purchases comes out of your account immediately. Many credit card companies will not charge interest on a purchase transaction as long as you pay the full balance by the due date, providing more financial flexibility.

That said, you want to be sure you can pay off your next credit card bill. If you’re unable to pay in full, consider alternatives like cash or a debit card to stay within your budget. Accumulating high-interest debt can outweigh any rewards and perks of credit cards when you are trying to improve your credit score.