5 money-saving credit hacks for the holidays
Financial blogs and credit repair sites are full of dire warnings about overusing plastic during the holiday season. After all, if you blow your budget, you could end up paying for Christmas 2014 well into the coming year. But there are also smart ways to use plastic. In fact, these 5 holiday credit hacks can help you spend less on holiday shopping, without sacrificing your gift list.
Accept the offer: The holiday season is rife with cash back or discount offers for consumers willing to pay with newly-issued plastic. Amazon, for example, was offering shoppers a $40 credit if they applied for the company's branded credit card this week. Retail stores also typical lure in new cardholders with promises of 10 percent to 30 percent off first purchases placed on the in-store card. The smart way to use these offers is to take them during the holiday season, when you've got several hundred dollars worth of goods to buy, says Liz Weston, author of "Your Credit Score" and "The 10 Commandments of Money." With the average consumer expected to drop more than $800 on gifts this season, a 20 percent discount could save a bundle.
There's just one caveat. Don't charge more than you can pay off within a month or two, particularly on retail cards that typically charge 20 percent or more in annual interest. If you leave a revolving balance on this new plastic, you'll eat through the discount savings in less than a year.
Switch your rewards card: If you think you'll spend $3,000 in the next three months, it could pay to switch your rewards card too, according to CardHub, a credit card comparison site. Both the Chase Sapphire Preferred card and the Capital One Venture Rewards cards offer 40,000 bonus points to those who charge $3,000 in the first three months, the site's editors note. Those bonus points are worth between $400 and $500 in statement credits for travel expenses, depending on how the points are redeemed. That can take away some of the sting of flying home for the holidays.
But won't applying for all those new cards trash your credit rating? Not necessarily, says Becky Frost, consumer education manager with Experian Consumer Services. If you have good credit and haven't opened a bunch of new cards over the past 24 months, adding one or two new cards now won't hurt your score at all. In fact, if you pay off the cards right after the holidays, it could help your credit score, she says.
Why? A key factor in your credit score is your "credit utilization." That's the percentage of debt you have outstanding, compared with the amount you have available. Thus if adding a few cards boosts your available credit by a few thousand dollars, the same amount of debt reduce your "utilization." (In other words, if you have $1,000 in debt outstanding and have $2,000 in available credit, you're utilization is 50 percent. If you have $1,000 in debt but $4,000 available, you're using just 25 percent.) The lower your utilization, the higher your credit score.
If you're young and don't have much credit history at all, accepting a store's new card offer can help you establish credit, she adds. The key is to keep spending in check so you can always make the payments on time.
When should you not apply for new credit during the holidays? When you've been on a binge and have lots of new cards, or when you're about to get a big loan, such as a mortgage, says Weston. Although new credit applications typically nick your score by just 5 points per card, when you're about to get a big loan, every point can count.
Use your guarantees: If you bought something early in the holiday season and now realize it's cheaper, you may be able to use a little-known credit card perk to recover the difference. Citibank, Discover and MasterCard all offer some type of price protection that allows you to apply for a refund if you buy something and find out later that you could have gotten a better deal. The credit card price-guarantees vary, but the best of them can pay you back up to $500 per item if you overpay for a covered purchase. With the Discover and MasterCard deals, it's up to you to watch for lower prices.
With Citi's Price Rewind, they'll do the price-tracking for you, once you register the purchase. If a lower price for the same item is found on a retailers' site within 60 days, the credit card company will refund the difference up to $300 per purchase or $1,200 per year. But make sure you keep your receipts. Most companies will require them to be submitted as proof that you made the purchase.
Buy discounted plastic: Sure, you know that you can go to GiftCardGranny or any one of a number of other sites to buy lightly-used discounted gift cards, but did you know that a number of retailers sell brand-new gift cards at a discount too? This week Costco was advertising a $100 gift card for BedandBreakfast.com for $65; and $100 worth of cards for a series of popular restaurants, including Wolfgang Puck's, McCormick & Schmick's and California Pizza Kitchen, for $80. The recipient still gets a new card worth the face amount, you just spend 20 percent to 35 percent less to buy it.
Delay those "and one-for-me" purchases: Some 37 percent of American consumers expect to buy themselves a gift while they're holiday shopping, according to a recent survey by Experian Consumer Services. That's the sort of spending that can derail your budget and leave you swearing off the plastic when the debt hangover strikes in January.
There's a better option. If there's something you really want this holiday season, consider dropping a few broad hints. Make up a "wish list" and leave it out for your friends and family to see, suggests Frost. After all, they're planning to buy you something anyway. It's better for both of you if it's something you want so much that you'd buy it for yourself. To be sure, there's no guarantee that you'll get the item as a gift, but if you don't -- and you didn't blow your budget -- you'll be able to buy it cheaper during the post-holiday clearance sales.
