The 2015 holiday shopping season is upon us, and that usually means one thing: Huge credit card bills come January. It seems that every year, consumers proclaim that this will be the year that they don’t overspend, or that they will use cash only, but inevitably for most of us, January brings with it a heaping helping of regret.
While using cash, shopping for deals, and sticking to a budget can save you money as you work your way down the holiday shopping list, so can using credit cards. Yes, you read that right: Using your plastic can actually save you money this holiday season, even more than that buy one, get one deal on ugly holiday sweaters. The key is to be strategic in how you use your cards, and to understand all of the benefits that come with your account.
1. Credit Card Rewards
Credit card rewards are the most obvious way that you can save money on holiday shopping. If you’ve maximized your earning opportunities throughout the year on your travel rewards card, for example, you might be able to score a free plane ticket or hotel stay during your trip to Grandma’s.
However, free travel isn’t the only way that rewards can help you score a deal. Before you head out to the malls, check your account for any special offers you might qualify for. For example, many retailers offer cardholders an additional discount on purchases, or exclusive coupons. In most cases, these type of offers are tied to branded cards (a major credit card associated with the retailer) or store cards, but even some bank cards offer “shopping malls” via their websites that give cardholders free shipping or money-saving coupons if you use that portal.
Rewards from cash-back credit cards can also help reduce the cost of your gifts. If you’re planning to make a big-ticket purchase, such as a television or computer, using your card can give you a nice cash bonus. Just be sure to pay the balance in full right away, or the interest charges will negate the bonus.
2. Extended Warranties
Speaking of that big-ticket item, there is a good chance that when you make the purchase, you’ll be offered a protection plan or extended warranty. The cost of the plan depends on the value of the item, but before you add on the insurance, check your credit card terms. Many cards offer the same (or better) coverage for your purchase as an included benefit, so you don’t need to shell out the extra cash to protect your purchase.
Also, check your credit card details for extended return periods as well. While most stores offer an extended window for the return of unwanted holiday gifts, some credit cards extend that period. So if mom misses the deadline to return that ugly sweater, you aren’t always stuck with it.
3. Interest-Free Deals
Some credit cards offer cardholders promotional financing periods for large purchases during the holidays. For example, you might be able to score zero interest for six months on purchases over a certain amount. If you’re planning to make a large purchase, such an offer can save you some cash in the short term.
As long as you remember to pay the entire balance before the promotional period ends, you’re essentially paying the same as cash for the item without draining your checking account. Keep in mind that most of these offers will add accrued interest at the end of the promotion to any unpaid balance, which depending on your interest rate could be a hefty amount.
4. Purchase Replacement
You buy your son a new laptop — and it’s promptly stolen from his dorm room at school. You might think that you have to file a claim with you homeowners’ insurance to get a replacement, but some credit cards actually offer purchase replacement coverage if the item is lost or stolen for a covered reason. This is especially useful if you plan to do a lot of online shopping during the holidays.
Thieves are known to troll neighborhoods looking for packages to steal, and in most cases, the delivery company or USPS is not liable if the package is stolen after delivery. Making your purchases with a card that offers replacement coverage can give you peace of mind, and prevent you from having to replace stolen items out of your own pocket.
Setting a budget, making lists, and avoiding impulse purchases can all go a long way toward curbing the shocking January credit card bill. But before you leave your card at home, check your benefits. You might find that using plastic is actually the smarter financial move.