Be credit card savvy when shopping for the holidays
Before you step out the door with your credit card in hand for some holiday shopping, take some time to go over both your credit card statement and the credit card's terms and conditions. Such a review can help you avoid irresponsible spending with your credit card and can help those with multiple credit cards choose the best plastic for making holiday purchases.
One of the first things to consider is the credit limit for the credit card you will use for gift buying. Be sure that your credit limit has enough room to accommodate all the holiday presents you plan to buy. You certainly do not want to go over your credit limit during the holiday season. If your credit card balance is near your limit, even a few gifts could be enough to send you past the limit -- and into the world of penalty fees and higher interest rates, the credit card equivalent of a lump of coal in your stocking.
To prevent this from happening, find out the amount of your credit card balance either by looking at a statement or by calling the credit card issuer directly, and compare this to your credit limit. It may be possible to set up an e-mail alert through your credit card issuer that lets you know when you are nearing your credit limit. If you are getting close, you should try to pay off more on your credit card balances in November and December so that your bill in January doesn't end up including any nasty fees or a steeper interest rate.
Another thing to be careful of when using a credit card at holiday time is the danger of finance charges. For shoppers with several credit cards, avoid charging items on plastic with two-cycle billing. A credit card with two-cycle billing allows the card issuer to charge interest retroactively.
To understand two-cycle billing, let's say your credit card has a zero balance at the start of December. During your holiday shopping, you charge $1,000 on that credit card. You then pay $990 in January toward your credit card balance, with plans to pay interest on the remaining $10 on your next bill. However, two-cycle billing will charge interest on the entire $1,000 although you already had paid 99 percent of the balance on time. As a result, the amount of interest you pay will be significantly higher than it would with single-cycle billing.
Using a low interest credit card can save you from paying more for those holiday gifts, since carrying a balance means you do not get a grace period on new purchases.
Meanwhile, it's good to plan for the possibility that not every gift will be exactly what everyone on your list wanted. It might be hard for your aunt to enjoy a sweater that is two sizes too small, for example. Therefore, hold onto any credit card receipts as well as the original packaging the gift came in to help your friends and family make any necessary returns. Also, remind whoever gets the gift to leave tags on any presents they would like to return or exchange.
And, when making the initial purchase, you should ask about each store's return policy, since some stores may be tougher about returning merchandise, particularly with items that were on sale or seasonal. While a store should post its exchange or return policy, it is not required to do so by law, so asking the salesperson is a smart move. Gift receipts, offered by many stores, can be enclosed with the present to make returns easier.
Separately, if the gift you just bought later goes on sale, you may be able to ask the store for a price adjustment.
Published: December 6, 2006
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