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How to Spend Wisely with Credit Cards this Christmas

Americans have more pep in their step this Christmas. According to USAA’s fourth annual Holiday Spending Survey, consumers are more positive about their outlook this holiday gift giving season than last year and feel that they can spend wisely.

The financial giant’s findings were actually in line with recent reports from the National Retail Federation. The survey found that holiday sales are expected to grow above the current 10-year growth rate for holiday sales.

But, with this renewed optimism, there is a danger of overspending with credit cards when you could spend wisely. More people than ever before are planning on paying for some if not all of their Christmas gifts with their credit cards.

And, like always, most are not planning on paying off those credit card balances right away. So, how can you protect yourself from spending too much on your credit cards this holiday? Here are a few tips to help you spend wisely even while using credit cards during this holiday season.

USAA Survey Finds An Increase In Holiday Gift Giving

USAA’s Annual Holiday Spending Survey found that consumers plan to purchase more holiday gifts this year as opposed to what they bought last year. According to the survey, shoppers sentiment with respect to holiday shopping has become more positive this past year from surveys that were conducted in 2011.

For example, 40% of shoppers in 2010 reported that they had plans to scale back their holiday gift giving. Only 31% said they were scaling back their spending in 2011, and just 24% of Christmas shoppers said they were looking at reducing their spending in 2012.

Fewer Shoppers Are Making A Spending Plan

This year only 55% of all shoppers had a budget and a spending plan on how much and who they were giving gifts for this year. This was a worst percentage than the previous two years where 57% in 2011 and 61% in 2010 said they had a holiday gift giving budget. Despite the continued high unemployment and less than stellar financial markets, fewer holiday shoppers are planning to slow down on their holiday gift giving.

For three years in a row, holiday shoppers actually plan on increasing the number and amount of gifts that they are giving their friends, family, and loved ones. To make matters worse, shoppers are not making a spending plan or a budget when they set out to buy their gifts. This is the one place where I’ve strove to be better in my own financial life.

I have decided this year to write down every person that my wife and I are going to buy Christmas gifts for and to also list out the gift that we are buying in advance. Now that I have a budget and a plan, I can stick to what I plan on spending. This year is also one of the first years in a long time where I know exactly how much I am planning on spending.

Top 5 Reasons Why You Should Avoid Paying with a Debit Card

by Hank Coleman

Debit cards are the most popular non-cash transaction method in the U.S., with about 5.1 billion debit cards in circulation and $1.4 trillion in debit card purchases each year. Despite this popularity factor, paying with a debit card is generally a bad idea for many purchases when compared to alternative payment methods.

Why You Should Avoid Paying with a Debit Card

If you currently rely on debit cards for most of your purchases and orders, then don’t miss these major reasons why you should avoid paying with a debit card:

Legal Protections Against Fraud

According to Nasdaq, 31.8 million American consumers’ credit cards were breached in 2014 and the number of both credit and debit card breaches is supposed to rise 34% from 2014 to 2018. Globally, fraud losses on credit, debit, and prepaid cards hit $16.31 billion in 2014. That number is expected to fluctuate based on the increasing shift towards EMV cards (with chips imbedded in the card to prevent counterfeiting), and new technologies to prevent identity and financial theft.

For the time being, there are laws in place to protect consumers from fraud as much as possible. Most major credit card companies offer theft protection for their cardholders, which include both zero-responsibility policies for fraudulent purchases and email or text alerts when a large purchase is made far from the cardholder’s residence.

Under federal laws, credit cardholders are not liable for more than $50 of fraudulent transactions made on their card (again, many credit card companies don’t even hold you liable for a penny).

The story is somewhat different for debit cardholders, however. Under the Electronic Fund Transfer Act, debit cardholders have to notify their bank within 2 days of noticing a lost or missing debit card, just to qualify for the $50 loss liability limit.

If you notify your bank within a 2-60 day window, then you won’t be liable for more than $500 in fraudulent charges on your card. Waiting longer than 60 days to report the fraud may cost you the entire amount scammed from your account.

Worse still, even if you were to eventually receive a refund, you won’t have access to these funds until the claim investigation concludes.

Understanding The Rules of the Credit Score Game

by Hank Coleman

Your credit score is important. It can even have an influence on whether you will be successful with a job application because every employer will be able to access it if required.

Obviously the recession resulted in many people suffering, often defaulting on debts and seeing their credit scores fall as a result. If you have suffered this fate or if it is something you want to avoid, you need to follow some simple rules to understand the rules of the credit score game.

Tips to Understanding the Rules of the Credit Score Game

Pay on Time

If you fail to meet a bill on time you may find that you face a penalty, and your forgetfulness will result in a blemish on your credit history which will stay there for seven years. It may not be forgetfulness of course; you may be unable to pay.

If you have only been a few days’ late you may avoid the blemish, most lenders would not act for 30 days. If you can’t pay then you will certainly be getting that blemish.

Medical Problems

They tend to be unexpected by definition, at least initially. If you have no emergency fund it is likely that you will find difficulty in paying. That presents problems, certainly when you require ongoing follow up treatment. Your credit history will suffer too in addition to your credit score.