It’s hard to overstate the importance of holiday shopping in America. Every year, shoppers enjoy it, retailers count on it, and gift recipients are delighted. And after finding the best bargains, the next-greatest challenge shoppers face is to choose a method of payment.
If you use credit cards responsibly, they can be a great tool for protecting your holiday purchases, and even making some money off of them. Be sure to pay your balances in full every month if you want to avoid interest charges and maintain (or build) a good credit score. You can check your credit scores for free on Credit.com if you want to see how your credit card spending is impacting them.
While many stores accept cash, checks or debit cards, using a credit card offers several key advantages for holiday shoppers.
1. Credit cards can earn rewards.
One of the things that you will never get from your debit card or your checkbook are rewards for spending, yet many rewards credit cards offer valuable points, miles or cash back. Those who avoid interest by paying their balances in full should always expect some rewards for their spending. However, you shouldn't spend just to get rewards, especially if you carry a balance on your credit cards from month to month. Not only will the interest charges trump the rewards you might earn, increasing your balances on your credit cards over 30% of your limits could have a negative effect on your credit scores.
2. Credit cards offer better protection against fraud than debit cards.
While both debit cards and credit cards protect shoppers against unauthorized charges, there is a key difference. When a fraudulent charge is processed against a debit card, the funds are immediately removed from the cardholder’s account — often their primary checking account. Yet an unauthorized charge to a credit card merely appears on the cardholder’s statement, and can be contested before any money is actually missing from the consumer.
3. Credit cards help protect online shoppers.
When you shop online, you are accepting a merchant's promise to send you goods (or perform services), in return for your money. The Fair Credit Billing Act is a federal law that protects credit card users who do not receive the goods or services promised. So if an online retailer fails to deliver the goods, or goes out of business before doing so, credit card users can request a chargeback from the their card issuer if the merchant doesn't offer a refund. In these cases, the card issuer will immediately issue a temporary credit, which will become permanent once the claim is documented. In contrast, a shopper paying with a debit card cannot dispute charges that were legitimately authorized with their card issuer, even if products were never delivered. Just like those who pay with cash or a check, debit card users may ultimately have to take the merchant to court to resolve any dispute.
4. Many credit cards offer shoppers purchase protection policies.
Most credit cards offer a purchase protection benefit that covers new purchases for theft and damage. For example, Chase Sapphire and Sapphire Preferred credit cards have purchase protection policies covering theft, damage, or loss 120 days after purchase, for up to $500 per claim.
5. Some credit cards offer extended warranty protection.
Few things are as disappointing as finding out that an expensive purchase no longer works shortly after its manufacturer’s warranty expires. Thankfully, many credit cards feature an extended warranty policy that adds an additional year to manufacturer’s policies.
6. Credit cards can offer price protection.
Don't you hate it when a popular purchase experiences a price drop after the holidays? With the price protection policies of some credit cards, customers can receive a refund of the difference in price when this happens. For instance, Citi offers its Price Rewind benefit on all of its credit cards that will automatically issue a refund when a covered item experiences a price drop within 60 days of purchase. Cardholders have to register their purchases, but then Citi is able to track online prices and issue refunds without customers filing a claim.
7. Return protection policies.
Another problem that holiday shoppers can face is when they are unable to return purchases for one reason or another. Some stores might refuse purchases that have been opened or used, while others have require a receipt or impose time limits on returns. Thankfully, some credit cards offer a return protection policy, such as American Express. Its policy covers eligible items within 90 days of purchase for up to $300 per item.
Note: It's important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
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This article originally appeared on Credit.com.
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