A Pro’s Guide to Minimizing Holiday Shopping Costs

ARLINGTON, Va. (TheStreet) — It’s funny how the tenor of the holidays can change as you grow up. When you’re a kid, the holiday season is all about excitement and presents, but when you’re an adult, trying to make ends meet can cloud the fun. It’s therefore important that you’re aware of the best ways to minimize the cost of holiday shopping this year so the kid in you can emerge and maximize the merriment.

It all starts with comparison shopping and sale hunting, because if you aren’t paying the lowest possible prices you’re leaving money on the table. But you know that already. What you may not know is that being smart about the way you pay for holiday purchases can effectively supercharge your savings, while being careless can wipe them out altogether.

The right credit card can save you hundreds

When it comes to holiday shopping, there are indeed “right” and “wrong” credit cards to use. The best card for your holiday shopping needs depends on your spending and payment habits.

If, with holiday shopping considered, you expect to spend at least $3,000 during the next three months: The Chase Sapphire Preferred Card is the one for you. New cardholders who charge at least three grand during the first three months get 40,000 bonus points redeemable for a $400 statement credit or $500 in travel accommodations booked through Chase’s rewards portal. Considering the fact that the average holiday shopper is expected to spend $750 to $850, according to multiple surveys, the Sapphire Preferred Card could essentially lower your tab by around 50%.

If you want a card with more lasting benefit: The American Express Blue Cash Preferred Card might be preferable. While the preferred cards from Chase and Amex are by no means mutually exclusive, the latter certainly offers longer-lasting rewards earning potential. It gives you 6% cash back at supermarkets for up to $6,000 in annual expenditures, 3% at department stores and gas stations with no annual spending limit in those categories and 1% on everything else. It also offers a more easily attainable $150 initial rewards bonus for spending $1,000 during the first three months, which cancels out the card’s $75 annual fee for the first two years.

If you have a credit card balance: The Slate Card from Chase can provide big-time savings. The average household has $6,700 in credit card debt, and that figure is sure to rise during the holidays – otherwise known as the busiest shopping period of the year. The Slate Card offers 0% on balance transfers and new purchases for 15 months and doesn’t charge any notable fees. You can use a credit card calculator to determine how much such a free balance transfer offer would save you, but it wouldn’t be unrealistic to expect savings in the hundreds of dollars.

If you plan to finance holiday expenses: The Citi Diamond Preferred Card might be for you. It offers 0% on new purchases for 18 months and doesn’t charge an annual fee, so if you don’t have a significant balance but will need some extra time to pay off your holiday purchases, it could save you a lot in interest.

As far as the wrong cards for holiday shopping go, anything with terms inferior to the abopve offers would qualify.

There are deals on gift cards too

While you might consider a gift card to be more akin to a form of currency with a set value than a product with a negotiable price, that’s simply not the case. Some $41 billion in gift cards went unredeemed from 2005 to 2011, according to the research firm TowerGroup, and another $2 billion worth is expected not to be used this year. The result is a flourishing aftermarket for gift cards, where you can buy cards from the same retailers as you would ordinarily but at discounts of up to 80%. Anyone who plans to buy a gift card this holiday season should check out an online gift card exchange before opting to pay full price.

There is, of course, another side to the coin. You likely have a couple of unused gift cards lying around your home, and there’s no reason they have to represent sunk costs. You can sell them for cash through a gift card exchange and supplement your holiday spending power.

Holiday shopping isn’t kickoff, so don’t defer

The high cost of holiday shopping may lead you to search for a 0% financing deal that allows you to pay off what you buy over a matter of months without incurring interest charges. While the aforementioned 0% credit cards are great for that purpose, you have to be careful when considering the financing plans offered by a retailer, no matter how attractive they might seem or even if they’re the only way you’ll be able to bring the goodies home. According to Card Hub’s 2012 Deferred Interest Study, 62.2% of the major retailers that offer some form of financing have a deferred-interest payment plan, which will assess interest to your original balance retroactively if you fail to pay off the entire thing before the interest-free introductory period concludes. Such a plan – available through popular retailers such as Apple and Amazon – could inflate your costs up to 27 times and should be avoided.

So, to recap: use the right credit card; extract savings from gift cards (i.e., this year’s most-requested present); and avoid harmful financing plans. If you can, it will be a happy holidays indeed.

Odysseas Papadimitriou, a former Capital One senior director, is the CEO of the credit card and gift card market place Card Hub as well as the new personal finance social network Wallet Hub.

 

 

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