Choosing the Best Cards to Use for Christmas!
The average Christmas shopper is expected to spend $600 on gifts this year, so it pays to seek out discounts and cashback wherever possible.
One heavily advertised option is to sign up for a store card that offers a discount on your shopping, particularly if you plan to buy most of your presents, food and drink in one place. Department stores, clothing shops, supermarkets and online retailers all offer cards, but are they worth signing up to?
The first thing to remember is that store cards are a notoriously expensive way to borrow money - two out of three have interest rates of more than 25% APR.
Many of the Stores you will be shopping at will all charge rates of almost 30% on their cards. That’s not a problem if you clear your balance in full each month, because you won’t actually pay any interest.
But if you don’t, the high APR will wipe out any savings from the discounts. If you’re not intending to pay off your Christmas borrowing quickly, you will be better off with a standard credit card with a 0% introductory period.
Store employees typically try to sell you a store card when you’re at the register, usually using an introductory discount of 10% as bait, but this is often only available on your first shop so it pays to get everything at once.
“This can be a handy way to cut 10% off your Christmas shopping bill,” says Gerard Heitz, president of credit card comparison site 0-apr-creditcards.com.”So draw up your shopping list, take out the card and remember to clear your balance in time to avoid that sky-high APR.”
Some store cards offer loyalty points rather than a discount. These are less attractive to shoppers who don’t want to use them beyond the Christmas period. Overstock.com, for example, offers bonus points with each purchase, but you need 2,500 points to earn a $25 reward, which means spending a lot more on the card. And with an APR of more than 29%, earning rewards could be costly if you don’t pay off your balance.
Branded credit cards
A growing number of stores now offer a twist on the traditional store card - a store-branded credit card. Amazon, Overstock.com, and Starbucks, just to name a few, all have their own versions
Some store-branded credit cards boast initial offers or discounts - Amazon, for example, offers a $15 gift certificate when you make your first purchase.
Most cards also offer a points scheme to encourage you to keep spending. Often, the rate of points on offer for every $1 spent is doubled if you shop with the retailer. On the Amazon card, for example, you get one point for every $1 spent on the company’s website, and half a point for every $1 spent elsewhere. Typically, you will get vouchers worth $5 for every 500 points you collect, which is frankly rather Scrooge-like.
If you do opt to borrow on a store’s credit card look for one that charges a 0% introductory rate. That way you won’t have to start paying off your Christmas shopping until well into next year. The Overstock.com card offers 0% interest on new spending and balance transfers for six months, but watch out for the balance transfer fee of between $5 and $50. It then charges a reasonable APR of 15.5%.
Amazon offers 0% on balance transfers for nine months (with a balance transfer fee) and 0% on purchases for six months. Its typical APR is 15.9%, in line with the average credit card.
You may be offered a card and a discount at every shop you visit, but don’t go overboard and apply for them all as you may cause yourself serious problems. James Jones, consumer affairs manager at credit reference agency Experian, warns: “If you make too many applications in a short space of time, this may suggest you are having financial problems and are desperate for credit, or the victim of ID fraud, and damage your credit rating.”