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As the holidays roll in, stores go wild announcing their sales, savings and gift giving ideas.  For consumers it can either be a dream or a night mare.

Personal Financial expert Kelley Keehn says there are ways to cut costs during the holidays if you choose the right credit card.

Benefits to credit card use range from extended purchase protection to extensive points/rewards, according to Kelley.

Benefits of using a credit card to help you keep track and offer protection and rewards

  • If you are able to pay off your balance in full every month, there’s one more reason to pay for your purchase with a credit card: purchase protection. Purchase protection insurance will cover eligible purchases against damage, theft or loss typically for 90 days from the date of purchase.
  • Another benefit are the points and rewards that can add up really fast during the holidays
  • Interest free purchases for 21 days

What types of cards are best for rewards during the holidays?

  • The best card for rewards depends on you and your needs AND if you’re a responsible credit card holder.  If you’re always paying off your balance you can be rewarded big time.  There’s points of course for merchandise, travel and now even cash rewards.  
  • Ensure that the annual fee doesn’t actually cost more than your annual rewards.  For example, you net $300 in rewards after your annual fee is paid, which isn’t bad for just using a credit card.  However, if you had a travel card, that might not make much of a dent towards your family vacation. So $300 in cash rewards would be a better fit.

What type of protection is out there and what does it cover?

  • Built in insurance options are offered with most cards – if you break or lose something you just bought you’re protected for up to 90 days.  Some cards also offer extended warranties and travel protection.  If you book flights and rental cars, there’s some perks and coverage, but you need to read the fine print.
  • You’re never on the hook for fraudulent activity on your account, however, want to keep track of even a small suspicious purchase especially during the busy holiday season.
  • Credit cards also help with disputes with a merchant
  • Provides tracking of your purchases (as does debit but not cash)

If we’re using a credit, what do we need to do to ensure we don’t over spend?

  • Know your limits: you should never have a balance of more than 35% on your credit card
  • Just because you have a limit, it doesn’t mean it’s a target to hit. 
  • Create balance and purchase alerts – these are great instant re-reminders of what you just bought that can come across your email or smart phone from your credit card company. 
  • Don’t be enticed by retail cards offering instant discounts.  Just because you don’t activate it, doesn’t mean it didn’t hurt your credit score -  it does!
  • Check your balance and purchases online every morning when you have your coffee.  It just takes a minute and it’s easier than trying to remember some unusual purchase that you or your spouse made when the statement comes weeks later.

How can we avoid the holiday spending traps no matter what method of payment we use?

  • Set up and manage expectations.
  • The same idea applies for avoiding a financial hangover.  You just need to do a little preplanning.  If you wait until you’re in the retail store, you likely won’t have the willpower, just like going shopping hungry.

For those trying to stay on track, Kelley recommends this online holiday budget resource 

Monday, November 12, 2012