What is the safest way to pay for holiday shopping? Credit cards, experts say

In the final push to finish my holiday shopping, I like the convenience of using a credit card instead of having to fork over cash or keep track of debit transactions. Plus, I can earn rewards on my purchases. But, there’s another reason I use credit cards for almost everything I pay for: their built-in consumer protection.

All of my rewards and travel credit cards come with $0 fraud liability protection, and federal law adds another layer of protection that makes credit safer than debit or cash cards. Those safety features can be especially helpful when you’re in a rush and maybe not paying attention during these last, hectic days of the holiday shopping season.

Why you should use a credit card instead of a debit card or cash

One of the biggest advantages of using credit cards is their increased protection against fraud.

While federal law limits liability to $50 if you report your credit card missing or stolen after someone uses it, credit cards tend to have $0 fraud liability coverage.

Comparatively, if your debit card was lost or stolen and used for fraudulent charges, you could be on the hook for up to $500 if you reported your card lost two or more days after learning that was gone (but within 60 calendar days after your card). statement is sent to you).

I wish I could say that this is where the problem with debit cards ends. But if you report loss or fraud on a debit card more than 60 calendar days after your statement was sent to you, you could lose any money that was stolen from your linked debt accounts, according to the Federal Trade Commission.

Using a debit card as your primary payment method could lead to more problems if it’s stolen, according to a money-saving expert. Andrea Woroch. If someone has your debt information, they could steal money from a linked checking account. The money in your account may be tied up while the issue is resolved.

But your losses are limited if your credit card is stolen.

“If a thief uses your credit card, your real money is not tied up while the credit card company reviews the activity as it would with money in your bank account when using a debit card,” Woroch said.

Paying with cash or debit means missing out on the added protection benefits your card offers, which can include extended warranties, protection against damage or theft, or both.

“Some credit cards also offer extended return windows, which means you can process a return through the credit card past the store’s eligible return time,” he said.

Another reason to use a credit card instead of cash or debit is the rewards you can earn on holiday expenses and bills. Your holiday shopping list could earn you a generous credit card welcome bonus before the end of the year, and you can earn cash back, flexible rewards or travel points for every dollar you spend.

Cash has no protection or rewards at all. If you drop a piece of money or someone steals your money, you are completely out of luck.

What are the dangers of using a credit card for holiday shopping?

Woroch said the biggest risk that comes with using a credit card is the potential to overspend, since technically you can spend any amount up to your credit limit.

“The buy now, pay later mentality can trap you into spending more and then racking up a balance you can’t afford to pay off,” he said. Any balances you don’t pay by your next billing cycle will accrue interest. Interest charges could wipe out any value you see from the rewards.

Racking up charges on your credit card can also potentially harm your credit score. Your credit utilization—how much of your credit you use compared to what’s available—can affect your score.

So even if you pay off your card every month, maxing out your credit card can hurt your score. And if you end up making late payments or a payment is missing completely, which could damage your credit score even more.

Credit cards make it easy to sign up for subscription services that you might forget later, which could become a drain on your finances. Forgotten subscriptions may become gray chargesor charges on your credit card that you do not recognize but are not fraudulent.

Smart ways to use a credit card for your holiday purchases

If you plan to use your card for your holiday shopping this year, take these tips with you to the store.

• Use a card with purchase protection. Your gifts will be covered against theft or damage for 90 to 120 days, and if something happens, you can be reimbursed for the cost.
• Make the best of your budget. Credit cards can make tracking your spending simple. You can set alerts on the use of your card, which can help you keep the budget set for yourself.
• Only charge what you have the money to pay for. Only charge purchases you know you can pay for right away. Otherwise, today’s high credit card interest rates remove most of the benefits of paying with plastic.
• Earn a credit card welcome bonus if it works with your budget. If you already have your budget set and you’re ready to start shopping, Woroch said to watch out holiday shopping credit cards which have welcome bonus offers. There are a number of cards that offer bonuses of $200 or more when you spend $500 within three months of opening the account.
• Use credit card shopping portals to earn more rewards. Credit card shopping portals from issuers like Chase and all major airlines allow you to earn more points or miles when you shop at participating stores.
• Apply for a 0% APR intro credit card. Woroch also points out 0% APR credit cards as a valuable tool for holiday shopping. If you go this route, he suggested coming up with a specific repayment plan to ensure you pay off the holiday expenses before the 0% APR introductory period ends.

Tips to avoid overspending this holiday season

You can avoid overspending and credit card debt by setting a spending budget and sticking to it.

For example, if you want to spend a total of $700 on holiday gifts this year and you have a specific number of people to buy them to, divide that amount by the number of people on your list and set a specific gift limit for each person. .

One way to make sure you don’t overspend is by turning on card alerts and notifications, according to credit card project manager Kim Chambers of The Georgia Credit Union. That way, your balance won’t spiral without you realizing what’s going on.

As for rewards, Chambers recommended redeeming cash back and other rewards to cover vacation spending.

If you have any cash back or points built up before you start holiday shopping, you can redeem them for merchandise or gift cards to reduce how much you actually spend on vacation this year.

My holiday shopping cards

Any rewards credit card can be useful for holiday spending, but I certainly have my favorites. Here are some cards I used for my holiday gift list this year:

• The Capital One Savor Cash Rewards Credit Card*: I recently applied for this card to earn the welcome bonus and its 3% cash back on all our streaming services. The version of this card for excellent credit also has an intro 0% APR offer on purchases and balance transfers. It comes with standard fraud liability protection, security and purchase alerts when a payment is made or not recognized, and has virtual card capacity – everything that makes your holiday shopping safer.
• Costco Anywhere Visa® Card from Citi*: We do almost all of our grocery shopping at Costco, but we also buy all kinds of gifts there. Citi’s Costco Anywhere Visa® Card charges no annual fee, and earns 4% cash back on up to $7,000 spent on gas and EV charging each year (then 1% back), 3% back at restaurants and eligible trips. purchases, 2% back on Costco and Costco.com purchases, and 1% back on other spending. It also includes protection against damage and theft.
• Chase Sapphire Reserve®: I often use Shop through Chase to earn bonus points. I’m always trying to top up my Chase rewards balance since these points can be redeemed for statement credits, gift cards, travel through Chase and even 1:1 point transfers at Chase airlines and hotel partners. It includes a host of protections including zero liability and fraud protection. The latter monitors your account for any unusual activity and will notify you via text or email if anything is detected.

*All information about the Capital One Savor Cash Rewards Credit Card and Costco Anywhere Visa Card from Citi was independently collected by CNET and has not been reviewed by the issuer.