You’re probably anticipating a
lot of shopping this holiday season, and shopping these days usually
involves credit cards. You might be tempted to pull out whatever card is
in your wallet, but experts says it’s worth your time and money to be
just as selective about the credit cards you use as with the gifts you
purchase with them.
What’s the best card for you hinges on your
spending patterns, said Beverly Harzog, an Atlanta-based independent
credit card expert and consumer advocate.
Bill Hardekopf, CEO of Birmingham,
Alabama-based LowCards.com, which tracks more than 1,000 credit cards,
said they aren’t like the one-size-fits-all wool socks you’re planning
to give to your uncle Harry. “There are rewards cards for every hobby,
interest or passion you might have,” said Hardekopf, author of “The
Credit Card Guidebook.”
“What’s best for you may not be best for me,” he said.
Both experts recommend analyzing your
spending patterns from the previous year to determine what card fits
you. “Narrow it down to two or three cards, and then look at terms and
conditions very carefully, because the cards may have different payouts
on different categories or limits on how much you can make,” Hardekopf
said.
Harzog likewise urges caution: “Keep in
mind that rewards cards, in general, have higher interest rates than
other types of credit cards. If you carry a balance, you'll likely
negate the rewards you've earned. Pay your balance in full every month
and you'll really be able to profit from your rewards card.”
The experts offered their picks for the best cards for the holiday season, depending on whom and what you’re shopping for.
Cards for the Holiday Traveler
For travelers who need airline
flexibility, Harzog recommends taking a look at the Chase Sapphire
Preferred Card. If you spend $3,000 within the first three months, you
earn 40,000 bonus points, which are worth $500 in travel rewards. You
get 2 points per dollar spent on travel and dining, and 1 point per
dollar spent on everything else. Also, there are no foreign transaction
fees, which can add up if you're traveling overseas. “It's just a really
excellent card for someone who travels a lot,” she said.
If you’re traveling on two or four
wheels, Harzog favors the PenFed Platinum Rewards Card to save on
gasoline. You get 5 points for every dollar spent on gas purchases, 3
points per dollar spent on groceries and 1 point per dollar spent on all
other purchases. Through June 30, 2014, you get a variable 9.99 percent
annual percentage rate, which is exceptionally low for a rewards card.
Hardekopf’s pick is the American
Express Blue Cash Preferred Card, which yields 3 percent back on gas
purchases, with no limit. If you spend $1,000 in the first three months,
you get an extra $150 back.
When it comes to rewards for all
your travel, both experts put the Capital One Venture Rewards card at
the top of their lists, because you get 2 points for every $1 spent (vs.
the 1 point per $1 spent that is typical with most reward cards) on
travel-related purchases, plus the flexibility of using it for most
major airlines with no blackout dates. “Plus, if you spend $1,000 in the
first three months, you get an extra $100 cash back,” Hardekopf said.
If you are loyal to a particular
airline or hotel, branded cards might make sense. Harzog cited Starwood
Preferred Guest from American Express as one of the most generous. You
get 10,000 points with your first purchase and then 1 point for every $1
spent, and up to 5 points for every purchase made at any Starwood
hotel. “You can rack up points in a hurry with all kinds of perks,”
advised Harzog, who also likes Marriott’s Preferred card.
Among the airlines’ branded cards,
Delta and Continental stand out to Hardekopf for waived baggage fees and
lots of perks. Those only make sense, however, if you frequently use
those airlines.
Having guests for the
holidays can really bust your budget. The best card for saving on
groceries, according to the experts, is the Blue Cash Preferred Card
from American Express.
You get 6 percent cash back on
purchases at stand-alone supermarkets, but you receive no rewards when
shopping at superstores and warehouse stores. You get 3 percent cash
back at gas stations and 3 percent cash back on department stores.
Finally, you receive 1 percent back on everything else.
"So really, this card allows a hostess to earn rewards on everything from the groceries to the décor," Harzog said.
Cards for the Shopper
One of the best cash-back cards
for saving on everyday expenses is the Chase Freedom Visa, the experts
agree. You get 5 percent cash back on up to $1,500 in categories that
change every three months. Through the end of December 2012, the 5
percent bonus is available for purchases made at Best Buy and Kohl's, as
well as in the categories of hotels and airlines. Once you hit that
$1,500, you get 1 percent on everything else you purchase. “This card is
a great choice for the holidays,” Harzog said.
You also get a $100 cash-back bonus
if you spend $500 within the first three months. That would certainly
come in handy either during the holidays or when you get the bills in
January.
Although the 10 percent discount
frequently offered for purchases made with store cards might tempt you
when you’re standing at the checkout with an armload of items, Hardekopf
advises that you resist. “In general, the outrageously high APRs on
retailers’ credit cards are a significant drawback to them,” he warned.