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Your holiday credit card self-defense guide

11 tips for getting the most, spending the least

By Marcia Frellick

With the holidays around the corner and the Black Friday sales looming, it's time to gird up for the bargains, temptations and even criminal acts that may be coming your way.

holiday-trouble

The good news: A few simple moves can help keep the wolves at bay.

The National Retail Federation has released the results of its holiday shopping survey, which estimates consumers will spend an average of $689 this year, up slightly from last year's $682. However, if you don't do your homework and take the time to protect yourself -- not just from fraudsters, but from yourself and your own compulsions -- your own holiday bills could go sky-high.

These 11 tips can help:

1. Avoid letting your credit card out of your sight: More than at any other time of year, around the holidays your card sees lots of daylight. It's in and out of your wallet for shopping, meals, hotels and parking, and crowds give thieves more cover. Don't leave your card out, even in your own home if you have guests or workers, particularly at this time of year, warns the National Foundation for Credit Counseling. And make sure the person taking your credit card is legitimate, says Ken McEldowney, executive director of San Francisco-based Consumer Action. "If someone in a small shop wants to take your card in a back room for authorization, I'd be nervous."

2. Look for coupons on your credit card site: Major credit card issuers and retailers team up for the shopping season to offer holiday discounts if you charge on a certain credit card. You can often print out coupons from the website. For instance, American Express is offering $5 off when you charge $50 or more at Target.com on your American Express card through the end of the year. Visa is offering deals through February such as 5 percent off and free shipping on qualifying Barnes & Noble online orders or 10 percent off and free shipping on Blue Nile jewelry when you use your Visa card.

3. Check whether you have return protection in your agreement: Say you bought a sweater in November and a month later, just before you wrapped it, you decided that it just wasn't right for the person you bought it for. If the store's return policy was 30 days and you're on day 31, you may benefit from your credit card issuer's return protection policy, which allows you to return the item for a longer period. Visa, American Express and MasterCard all offer the service on some of their cards, but be sure you know the specifics. Each has limits and restrictions.

4. Use credit, not debit, cards for online purchases: People who shop online will spend 24.6 percent more than average adults this season -- $858.49 for online shoppers versus $688.87 for all adults -- according to the NRF 2010 Holiday Consumer Intentions and Actions Survey, which polled 8,767 consumers. (It was conducted for NRF by BIGresearch Oct. 5-12.) If you pay for those purchases with a debit card, you may be taking a risk. "Federal protections are far less for debit cards than credit cards," says McEldowney.

While you may have voluntary protections on liability from the debit card company, he says, debit cards are not covered under the federal Fair Credit Billing Act as credit cards are. The FCBA offers protection in the case of billing errors, products that don't work and products ordered but not shipped, for example. Debit cards fall under the Electronic Funds Transfer Act for errors, loss or theft, but liability, which is capped by law at $50 for credit cards, may run from $50 to $500 or more for debit cards, depending on when you report the problem. In addition, a credit card issuer may step in to help you if you dispute a credit card bill with a merchant.

5. Expect the unexpected expenses: Don't forget the extras at the end of the year -- the tips for the babysitter, mail carrier and hairdresser, the hefty grocery bills and the bottles of wine for party gifts. Make a budget, add 10 percent for surprises and stick to it, says Jessica Oestmann, credit counselor with American Financial Solutions in Seattle. The most requested gift this year? The NRF survey says gift cards (57 percent), followed by clothing (48.2 percent) and books (47.3 percent).

6. Ask about price matching: Call ahead to see if one big retailer will match prices if the item is offered cheaper elsewhere, Oestmann says. That way, you can do your shopping all at once with the confidence you're not losing out on discounts and you won't have the extra temptations of numerous stores. One-stop shopping online will save in shipping costs, but look for free shipping offers at this time of year. One place to check out for free shipping codes is freeshipping.org. Also, Dec. 17 is the third annual Free Shipping Day, and hundreds of merchants are expected to participate.

Credit cards are becoming a luxury whereas before they were a regular commodity.

-- Hubert Rivera
InCharge Debt Solutions

7. Order your credit report: Consumers can get one free credit report every 12 months from each of the three bureaus -- TransUnion, Experian and Equifax. You can order a report now through AnnualCreditReport.com from one bureau, and order another in January from a different bureau, the NFCC advises. This will alert you to any unusual activity.

8. Remember, your bank is watching: If you rack up excessive charges over the holidays, your bank might see you as a higher risk. That could lead to reducing your credit limit or even dropping you as a client, says Hubert Rivera, vice president of consumer outreach at InCharge Debt Solutions in Orlando, Fla. "Maybe three years ago that wouldn't have happened but with everything that's happening with the economy, you have to be wary of that right now. Credit cards are becoming a luxury whereas before they were a regular commodity." Buying early and spreading out your purchases over several cards will help guard against this, he says.

9. Resist the offers to open up a new retail credit account: Sure, it's great to get the instant 10 percent to 15 percent discount, but interest rates on retail credit cards is often as much as 15 percent higher than regular credit cards. If you don't have the discipline to pay it off at the end of the month, you will have lost the benefit of the discount, Rivera says.

10. Consider layaway: Layaway plans made a resurgence during the recession and some stores -- such as Kmart, Burlington Coat Factory, Sears and Marshalls -- offer the payment option at at least some locations. "That way you can get that last sweater in that last size and not have to pay interest on a credit card charge," says Dorothy Guzek, a certified financial counselor for GreenPath Debt Solutions in Troy, Mich.

11. Put your credit on ice, literally: Saving up cash ahead of time will help avoid the urge to overspend with credit. "When you use a credit card you generally spend 12 percent to 18 percent more than you normally would," Oestmann says. "If the temptation to use your credit card is just too strong, put it in a tub of water and freeze it. By the time it defrosts, the temptation to overspend will have passed."

 See related: 2010 credit, debit card holiday discounts, Chart: Where the 2010 credit, debit card holiday discounts are, How to dispute a credit card bill with a merchant, Chart: Compare interest rates on retail credit cards, 10 questions to ask about layaway plans, How to get an actual free credit report, 4 keys to zero-liability policies, 5 federal laws that protect credit cardholders

Published: November 17, 2010


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