NEWS

01 Oct

5 reasons it's smart to use credit when holiday shopping

The average American shopper will spend around $975 on holiday gifts, according to past spending trends and estimates from the American Research Group and the National Retail Federation. Although shoppers have various payment options at their disposal, the use of credit cards remains a popular and financially savvy way to handle purchases, albeit when done correctly.

1. Build your credit history.

Creditors look at how individuals use credit cards when determining credit scores. One of the biggest components of a credit scoring model is payment history, or the pattern of using credit and paying it back on time. Making repeated purchases on credit cards and then paying the bill when it is due can result in a spike in credit score and help consumers build a healthy credit history. The key is to make payments in full and on time.

2. Credit is safer than carrying cash.

Stores are very busy during the holiday rush, and consumers are easily distracted. Carrying around large sums of cash for purchases can put you at risk for theft or losing the money along the way. There's little chance of having lost or stolen cash returned, but a credit card can be cancelled and replaced. Plus, financial institutions have security protocols in place to freeze accounts and erase purchases that were made under fraudulent scenarios.

3. Track your purchases.

Credit card companies track all purchases and will itemize shopping excursions on cardholders' statements. This can make it much easier to keep track of your spending. In addition, some stores do not require receipts for purchases made with credit cards.

4. Earn reward points while spending.

Competition in the credit card world is stiff, and many financial institutions are trying to entice customers with special deals for signing up and using their cards. Some credit cards give cash back. Others accrue points based on spending on particular categories, such as dining or travel. Rewards can be redeemed in various ways and can be a big bonus of using credit over cash.

5. Cards may come with warranties.

Credit cards can provide built-in warranties on purchases made on the card, such as replacement coverage for an electronic device or cancellation insurance on a trip. What's more, if you have a dispute with a merchant or aren't happy with something you bought, you can often request a chargeback through the credit card company.

Credit cards have many advantages, but it's imperative that consumers pay their balances in full and on time.

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