Dollar Stretcher Guest Bloggers : Holiday Shopping

Online Spending Much Higher with Credit Cards Than Debit Cards

PamH — Wed, 30 Nov 2011 17:46:00 GMT

by Bill Hardekopf

Holiday shopping on Cyber Monday was extremely strong, with analysts estimating sales to be 15% to 33% above last year's totals. Not only are a greater number of people now shopping online, but new research shows they are spending more when paying with a credit card.

Consumers spend an average of $82.10 on a single online transaction with a credit card payment compared to $58.29 by those using a debit card, according to Javelin Strategy & Research's latest Online Retail Payments Forecast report. The study was based on over 2,300 respondents.

Javelin predicts this trend will continue long beyond this holiday season. U.S. consumer payments volume from online use of credit cards will climb 63 percent from 2011 to 2016, but debit card online payment volume will only grow by 2 percent.

This research follows a recent study by the Journal of Consumer Research (entitled "Do Payment Mechanisms Change the Way Consumers View Products?") that explains how the perception and evaluation of products differ with cash compared to a credit card payment. Consumers paying with a credit card focus on the benefits of the product, which increases the natural desire to spend. Consumers that pay with cash are more likely to choose an option based on cost, even if that option offers inferior benefits.

Both studies provide more evidence that consumers must be wise when it comes to shopping with a credit card. This is especially true during Christmas when it is so easy to get caught up in the spirit of giving and buy that extra gift or two. That's why over 14 million people are still paying off credit card purchases from the 2010 holiday season. We all need to make a holiday budget and stick to it.

Using Reward Credit Cards for Holiday Shopping

PamH — Mon, 21 Nov 2011 16:33:00 GMT

by Bill Hardekopf

Throughout 2011, credit card issuers have sweetened reward card offers to attract more consumers. Since most consumers spend so much additional money during the holidays, this is a great time to take advantage of these offers and quickly earn some extra cash or miles.

Here are six tips for using reward credit cards to maximize your holiday shopping:

1) Use your rewards points.

These can be used to buy gift cards with many retailers. For example, you can use American Express Membership Reward points to shop at Amazon.com to pay in full or for part of your purchase.

2) Pay attention to partner programs.

Most credit card issuers have a partner program that offers discounts or bonuses for online purchases with certain companies. The program varies by issuer, but the partners could be stores where you already shop. Discover turns $20 rewards into $25 gift cards. Citi gives an additional 1%-5% cash back when you shop at their online partners. Capital One is adding bonus rewards for purchases made from November 25-28 with some retail partners in its online shopping portal, Perk Central. Some retailers include Landsend.com (100% rewards increase), Macys.com (40% rewards increase), Lego.com (100% rewards increase) and Gamestop.com (40% rewards increase).

3) Look for 5% rotating cash back offers.

Chase Freedom, Discover More and Citi Platinum Select offer an attractive 5% back on the spending on designated categories for a specific amount of time. The October-December bonus categories for these issuers focus on shopping and entertainment. If you have these cards, remember to sign up for these attractive rebate offers each quarter since enrollment is not automatic.

4) Check for spending bonus opportunities.

Chase Freedom offers $200 spending bonuses for new applicants who reach a set spending limit, $500 within three months. Holiday shopping is the best time to quickly reach these limits and then use the bonus to pay off your balance.

5) Pay attention to reward limits.

Some cards, like Discover More (5% cashback on up to $300 in purchases each quarter), place a limit on the bonus. After you reach the limit, switch to another bonus card.

Best Reward Cards for Holiday Shopping

Capital One Cash - Offers 1% cash back on every day purchases and a 50% anniversary bonus on cash earned on purchases in the previous year. It also gives a one-time $100 bonus once you spend $500 in the first three months. No annual fee.

Chase Freedom $200 Cash Back Bonus - Get $200 cash back after you spend $500 in your first three months. Earn 5% cash back on dining, department stores, movie theaters, and charitable giving. No annual fee.

Discover More - 0% APR for 15 months on purchases and balance transfers. Earn 5% Cashback Bonus on up to $300 in purchases at department stores, clothing stores and restaurants and 1% on all other purchases. No annual fee.

Citi Thank You Preferred - Earn 10,000 bonus ThankYou points after $500 in purchases within the first three months, good for a $100 gift card. Earn five ThankYou Points for every $1 spent on all purchases at gas stations, supermarkets and drugstores during the first 12 months and one point for every $1 spent thereafter. No annual fee.

Continental Airlines One PassPlus Card - Earn 25,000 bonus miles the first time you use this card. This is enough for a round trip ticket within the United States and Canada. The $95 annual fee is waived the first year.

BankAmericard Cash Rewards - Gives a $50 cash rewards bonus after you make at least $100 in purchases within 60 days of account opening.

Ten Tips to Avoid Holiday Credit Card Debt

PamH — Wed, 16 Nov 2011 14:14:00 GMT

by Bill Hardekopf

The kids are still eating their trick-or-treat candy, and Christmas has probably not even entered their minds. But according to the National Retail Federation, nearly 40 percent of consumers had already started their Christmas shopping before Halloween.

The most wonderful time of the year has crept into October and November, but Christmas must be celebrated with a budget and a spending plan. A survey by Consumer Reports showed that 14.1 million or 6% of Americans are still paying off credit card purchases from the 2010 holiday season, up from 13.6 million in 2009.

Last year, approximately half of Americans charged at least some of their gift purchases, according to the Consumer Reports survey. Credit cards provide an easy way to buy, but they must be used with caution, especially around the holidays.

Here are ten tips to avoid holiday credit card debt:

Start saving now. Look at what you spent last year and try to save that amount in the next two months. If you spent $500, you can save $71.50 per week for the next seven weeks and pay cash for everything you purchase, or apply that payment to your January credit card balance so you don't have to pay interest on your holiday spending. Instead of eating out, take your lunch to work or eat more meals at home from now through December. Apply that money to your Christmas purchases.
Make a budget and then keep a record of all gift purchases and holiday expenses from postage stamps to the food for the office party. It is hard for shoppers to make a budget and easy to underestimate their spending. Last year, respondents in the survey anticipated spending an average of $457 on gifts, but really spent $556, a 22 percent increase. Of those that made a budget last year, 45 percent exceeded it.
Change your shopping habits now before you get into the spirit of the season. If you can't afford to pay off your credit card in November, then you can't afford to add a lot more to it in December. Generosity to friends or the perfect gift for the family are not good reasons to put yourself deeper into debt. If you are one of the 14 million people still paying off purchases from last Christmas, then you can't afford shopping on a credit card this year. If you must use a credit card to pay for Christmas, make sure you can pay it off by Easter.
The best way to stick to your budget and avoid impulse spending is to pay in cash. Pulling cash out of your wallet or purse and handing it to someone else is painful and a reminder that the less you spend, the more you can keep.
Before making your first holiday purchase, verify the credit limit on every credit card you use. If you are unaware that your limit has been lowered, you can unknowingly exceed your credit limit. This can cause problems, including a lower credit score and a significantly higher APR.
If you are looking for a new credit card, this may be a good time to apply. If the card has a 0% introductory rate for purchases for six or 12 months, you can use your card as a free loan for holiday spending. This is recommended only if you pay it off before the interest charges begin.
If you carry a balance, calculate the cost of adding new charges to your credit card. This will probably serve as a wonderful deterrent to using your card. If you charge $1,000 on your credit card with an APR of 15%, and you choose to pay just $30 each month, it will take 44 months to pay off Christmas 2011 and you will pay an additional $302 in interest.
If you are going to carry a balance, contact your issuer and ask for a lower rate. They may not be as willing to negotiate as they were several years ago, but it doesn't hurt to ask.
Use your rewards points for holiday shopping. These can be used to buy gift cards with many retailers. You can also apply your American Express Membership Reward points to shop at Amazon.com to pay in full or for part of your purchase.
Pay attention to partner programs. Most credit card issuers have a partner program that offers discounts or bonuses for online purchases with certain companies. The program varies by issuer, but the partners could be stores where you already shop. Discover turns $20 rewards into $25 gift cards. Citi gives an additional 1%-5% cash back when you shop at their online partners.

Don’t Break the Bank this Holiday Season

PamH — Mon, 29 Nov 2010 17:32:00 GMT

courtesy of A New Horizon Credit Counseling

With fall well underway and the winter holidays just around the corner, many people begin to think about that traditional yearly task. No, we’re not talking about adjusting your clock for the end of daylight savings time. Holiday shopping time has arrived but that doesn’t mean you need to take out a second mortgage just to spread the holiday cheer.

This holiday season make it a point to plan your purchases well in advance. Most consumers who rack up the holiday debt do so because they failed to plan ahead. Hurried, last minute shopping will come back to bite you when you get your credit card bill. Try incorporating these tips to give your wallet a holiday gift:

Set a budget and stick to it. Sometime early in November compile a list of whom you plan on giving presents. Set an overall budget, and then divide that budget between the people on your list. For instance, you might want to spend 20% of your budget on your spouse, but only use 5% on distant Uncle Joe.
Look for online deals. If you start early, you can shop around and find the best price. Look for websites that price shop for you. Several prominent websites will compare prices for you. Some of the more prominent sites include:

Google.com/products
Pricegrabber.com
Nextag.com

Research internet coupons. Several websites provide coupons that can be used during checkout at popular online retail sites. RetailMeNot.com is a good place to look.
Be aware of “sale adjustments.” Keep your receipts. If you purchase an item at full price and it goes on sale the following week, bring your receipt to the store and ask for an adjustment to the sale price. Retail stores will often issue you a partial refund to effectively give you the sale price.
Look for price-matching policies. Many retail stores will match the prices offered by their competitors.
Consider layaway. Layaway plans offered by retailers can be a good alternative to purchasing with credit. Layaway allows you to purchase an item in installments. Typically, however, the store will hold the item, or “lay it away”, until your last payment. Make sure to begin the process early, though, so you have the item in time for the holidays!
Check out online auctions. eBay and similar auction sites can provide great deals to watchful and patient consumers. If you buy through an auction site, though, make sure to purchase the item at least a couple weeks before the holidays. Some sellers may take longer to ship items than others.

The Friday following Thanksgiving, also known as Black Friday, is traditionally the most popular shopping day of the year. Black Friday can be a great opportunity to buy at a savings, but be aware of some pitfalls.

Stick to your budget. This bears repeating, especially when Black Friday rolls around. A $500 item offered for $300 may be a great deal, and very tempting but don’t get charmed by the savings; if your budget for that person is $50, stick to it.
Be aware of an item’s price history. It’s not unheard of for some retailers to slowly raise the prices of items in the weeks leading up to Thanksgiving, only to lower them to “sale” prices for Black Friday. Make sure that “deal” is really a deal.
The early bird gets the worm. Some stores open as early as 4:00 AM. Lines form the night before. Any given store may only have a handful of the best sale items actually in stock. Be early, or risk losing out on the sale. Take your spouse or a friend and split up the shopping, each tackling a separate store.

As a final note, remember to ship early if you’re planning on sending gifts through the mail. If you wait too long you may need to ship express or 2-day at a substantial cost. Happy shopping!

courtesy of A New Horizon Credit Counseling, a national, non-profit credit counseling organization dedicated to providing counseling services and financial education programs to individuals and families from all walks of life helping them with debt consolidation of their unsecured debts.

A Bleak Holiday for Credit Card Issuers?

PamH — Fri, 20 Nov 2009 14:25:00 GMT

by Bill Hardekopf

New holiday spending surveys are providing data that shows consumers plan to cut their holiday spending and reduce their usage of credit cards. Credit card delinquency rates are up again, showing consumers are still under financial stress. Many cardholders are still reeling from large APR increases they have received this year and they can no longer afford to charge their way through the holidays.

According to the National Retail Federation's 2009 Holiday Consumer Intentions and Actions Survey, U.S. consumers plan to spend an average of $682.74 on holiday-related shopping, a 3.2% drop from last year's $705.01. About 71% of consumers plan to use cash, check or debit cards as their primary payment method when buying holiday gifts. Only 28.3% of shoppers will use credit this year compared to 31.5% a year ago, a 10% decrease.

Paying with cash is the best way to add a safety brake during holiday shopping. Studies show that consumers typically spend 12-18% less when we use cash for payment. Counting out and handing over cash is a sobering reminder of how much items really cost. It makes you pause and consider if the purchase is really worth your labor.

According to a recent USAA survey, more than half (55%) of respondents are planning to avoid charging their holiday purchases and 85% plan to use cash for some of their holiday purchases. Among the shoppers who plan to use their credit cards, 74% plan to pay off their balance immediately so that they do not pay interest. 20% say they will pay off the balance in a few months while 7% say they will only pay the minimum balance.

However, many consumers have not prepared a plan for holiday spending. 19% are not sure how they will pay for their holiday purchases. 22 % who plan to use cash haven't saved any money in advance. (USAA survey) Now is the time to budget and plan for your holiday shopping so you don't get caught up in the moment and spend more than you can afford. Credit cards rates are now too high to just charge something and assume you will be able to pay it.

If you charge $1,000 on a credit card with an interest rate of 15% and just pay $25 of your balance each month, it will take you until May of 2014 to pay off this Christmas, and you will pay an additional $370 in interest. If your APR was recently increased and you carry a balance, leave that card at home so you won't charge anything more on it.

Millions of Americans are still paying off the holiday purchases they made last year. 6% of adults (or about 13.5 million Americans) were still carrying debt from last year's holiday season. In households with children under 12 years old, 10% were still carrying debt. (Consumer Reports Holiday Shopping Poll, October 2009).

Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The LowCards.com Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for all 1060 credit cards offered in this country.