Debt Views

The National Retail Federation announced last month that U.S. consumers plan to spend an average of $816.69 on holiday-related shopping for others and another $106.67 taking advantage of special promotions and discounts to treat themselves. This brings total planned holiday-related spending to $923.36.

Over the past 5 years the method of payment for holiday spending has shifted, according to the NRF. Cash use for purchases has fallen steadily over the past five years from 33 percent to 24 percent. There has also been a drop in check use from 13 percent to 6 percent. This year check use should fall to 0! Seriously, who uses checks anymore? The use of credit cards has fluctuated up and down between 27 percent 5 years ago and 31 percent last year. The big gainer in use has been the credit card’s plastic cousin, the debit/check card, increasing from 27 percent in 2002 to 39 percent last year.

It is clear that using a form of plastic is the direction consumers are headed, but not all plastic is created equal. Those using a debit/check card are putting themselves in unnecessary risk and loosing out on great security features that switching to one could give you.

There are several ways that credit cards offer security that no other form of payment can. For starters, you don’t risk losing your cash if you have your wallet or purse lifted while shopping.

Secondly, if you use a debit/check card for a purchase, the money is immediately taken from your account. That may be good for people who cannot budget well, but if there is a problem with the transaction, like a higher amount is taken out than you authorized, the money is gone and you’ll be without it until you can get it straighten out. With a credit card if a higher amount than you authorized is charged, the bank’s money is gone.

Thirdly is the reason for this article. If you are planning a significant purchase there is a definite advantage to paying for it with them over anything else.

Features vary from company to company and even from card to card, so check with your issuer for details of features available on your card. Odds are however, if you are carrying a VISA, MasterCard or an American Express card, you have some pretty great features available that don’t cost you a thing and most people don’t even know about, let alone cash in on. Currently Discover Card does not offer these services.

Extended warranty protection

Whether the name is Buyer’s Assurance Plan from American Express, Warranty Manager from Visa or the obvious Extended Warranty from MasterCard, the feature is the important part. Most personal cards, the terms are different for business cards, will automatically double the length of the original manufacturers warranty by up to one year if you charge the entire purchase price to your card. A 90-day warranty on a digital camera for example would become a 180-day warranty. The doubling effect would cover a product with a manufacturer’s warranty of one year for one additional year. Extensions do not go beyond one year.

There are some limitations. American Express won’t offer the extended warranty coverage for a product with an original manufacturer’s warranty of longer than five years. VISA says three years and MasterCard says one year. There are additional limitations when you purchase an extended warranty from the manufacturer or retailer.

As mentioned, this coverage extends to items purchased as gifts as well. Just be sure in all cases to keep your paperwork such as the original receipt, charge slip, your monthly statement, product serial number, and copy of the manufacturer’s warranty.

Satisfaction guaranteed

Have you ever purchased something electric, maybe a CD player or blender, and a week or two later you just don’t like it? Perhaps it functions funny or not as you originally thought. You tried returning it to the store, but the manager wasn’t interested because you were outside the store’s return policy. You may be able to take advantage of American Express Return Protection or MasterCard’s Satisfaction Coverage which says that if you are dissatisfied with a purchase within a certain time period, like 60 to 90 days, you may be eligible for a refund. This is particularly good for items like kitchen electrics or home electronics. This coverage can also be great for new items purchased on eBay or through the mail.

Accidental damage or theft protection

Most card holders can benefit from the safety and security offered through a purchase protection plan or as MasterCard calls it, Purchase Assurance Coverage. This plan will cover purchases made using the credit card against theft, loss, or accidental damage that occurs, typically within the first 90 days. It covers you in the event that you purchase an item using your credit card that becomes damaged on the way home or soon thereafter, becomes lost, or someone steals it. Obviously this is great if an item is stolen, but also useful if you have a broken item that the store won’t take back and the manufacturer won’t fix it because it insists it was your fault.

Repairs or refunds

In most situations, for each type of coverage, the credit card company will refund the amount of the purchase as shown on your store receipt or statement, back onto your account. There is almost always a maximum limit to how much money can be refunded under the insurance. In other cases they may decide to repair or replace the item. This of course, is at the discretion of the company. Also, they will not pay for shipping and handling, installation, tech support or any of the other ancillaries. There is nothing to sign up for and you don’t have to register to get coverage. It is automatic when you make the purchase with a credit card. Some companies however do offer a registration service to expedite future claims.

Read the fine print

All of the information contained here only scratches the surface. Naturally there is a lot of fine print. As you would expect, conditions and exclusions apply. The benefits also vary by issuer so be sure to check with the bank for specifics. In general, if you do qualify for a claim, you will find the benefits are quite generous. Call your credit card company and ask them to send you the detailed information about the programs available with your card, not just a list of the program names.

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“What?! $3.37 a gallon for the CHEAP stuff?!” If that sounds familiar, you’re not alone. Gas prices are climbing higher and higher and there is no end in sight. Since we need it to get us where we’re going (most of us anyway), it only makes sense that we start looking for ways to save on gas or gain something more than a full tank each time we fill up. Gas credit cards might be the answer.

Gas credit cards are convenient of course, who doesn’t like the ease of swiping the card right at the pump, filling up and taking off? Especially moms with young children in car seats – why take them out just to run inside and pay for it when you can pay right at the pump and keep them in their car seats?

Having a gas credit card is also a great way to keep better records on what you’re spending on gas. This is particularly important for businesses which are required to maintain data involving such costs for their income taxes.

Not only are the cards convenient, but they’re handy in emergency situations when traveling away from home, if you’re low on cash you at least know you will be able to keep your vehicle full of gas to get you where you’re going. Additionally, they give you additional rewards and offers that help make the expense of gasoline a little less cringe-inducing since you know you’re getting something more than a tank of gas out of the purchases.

• Cash back programs on them help you get back a percentage of what you put into your tank.
• Get back on the road faster and easier when you can swipe the card at the pump.

Because of the continuous increases in gas prices, many credit card issuers are offering gas-specific credit cards. Having decent credit makes it easier to apply and gain approval for a gas credit card, but there are many cards offered to people with average and even below average credit scores, too- although the lower your credit score the more likely it is that you will need to pay an annual fee.

These sometimes are specific only to gas purchases; while others allow you to use them as a regular credit card and shop elsewhere. You may earn higher cash back percentages or better rewards on purchases made on gasoline and car maintenance, but a credit card with gas rewards may be more convenient if you are someone who likes to keep just a single credit card in their wallet- rather than several cards each aimed towards specific types of purchases.

Typical gas rewards programs are offering about 5 or 6% of your gasoline purchases back, in the form of cash back applied to your card statement, or checks sent through the mail. If you’re considering a new car purchase in the near future, you might want to look into them that also offer car lease or purchase rewards programs.

If you want your gasoline credit card to benefit you, rather than cause you more financial problems than the ever-rising costs of fueling up, you need to be extremely careful with the card. Don’t fuel up all month long and forget that you eventually have to pay for that fuel! Careful budgeting is the key to success when you decide to make your monthly expenses on a credit card. Paying your balance in full each month is the best way to be sure you are going to benefit from the rewards program rather than cost yourself additional money in finance charges, interest, and late fees.

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With the holiday shopping extravaganza just around the corner it is well advised to look at your finances to properly budget for the event. You should not be dipping into your rainy-day fund for this. Christmas comes every year; it’s not an emergency. Figure out what you can spend and spend less than that.

Last year more than 30 percent of consumers paid for holiday gifts with a credit card according to the National Retail Federation. For those with the discipline to control their debts, they offer security, rewards and money saving. If you are a responsible user, here are some available cards and advice that will keep on giving the whole year.

What’s the Deal?

On September 20, the NRF released its forecast for the upcoming 2007 holiday season, predicting that sales will rise 4.0 percent this year to $474.5 billion.

“Retailers are in for a somewhat challenging holiday season as consumers are faced with numerous economic obstacles,” said NRF Chief Economist Rosalind Wells. “With the weak housing market and current credit crunch, consumers will be forced to be more prudent with their holiday spending.”

According to NRF’s 2007 Holiday Consumer Intentions and Actions Survey, conducted by BIGresearch, U.S. consumers plan to spend an average of $816.69 on holiday-related shopping. In addition, these shoppers will spend an additional $106.67 on special “non-gift” purchases by taking advantage of promotions and discounts to treat themselves. This brings total planned holiday-related spending to $923.36, an increase of 3.7 percent from 2006.

We all know the enthusiasm and fun or misery that comes with Black Friday shopping. Many people kick off the holiday shopping season by scooping up great deals and ringing in the discounts. Whether you will be spending exactly what BIGresearch estimates consumers will spend this year, or you plan on spending more or less-in the end, how would a rebate check for up to 5 percent sound? That check would be for more than $45 for the survey household.

How does it work?

America witnessed the start of a revolution in the credit card industry when Discover Card was unveiled nationally during the 1986 Super Bowl. At the time, annual fees were common and cash rewards were unheard of. Discover Card set out to change that as a pioneer in offering cash rewards and no annual fee.

Today nearly every credit card issuer has a card available with a cash rebate program; some have a dozen. Cards can be as basic as 1 percent cash back on every purchase, to cards that target specific purchases made at supermarkets, drugstores, gas stations and even utilities like cell phones and cable to earn you even more cash back. A cash rebate is just what the name implies: cash back. Not miles, gift cards or buy something at discount in our special shop-actual cash back.

A new credit card takes time to process and mail out, but if you act quickly you can have a new card in your hand in time to take advantage of rebates for your holiday shopping.

As more and more of these cards have become available and more and more rebates are being given out, card issuers have become very good at making sure they don’t loose money on the deal. Many cards advertise high cash back rewards; some as high as 10%. But these rewards are only for a limited time, usually three to six months, or only for specific purchases. Then the rebate amount often becomes 1%. Read the fine print carefully; it is all laid out.

Who offers what?

One of the newest cards available is the Citibank Cash Returns Card. This card offers the greatest return for your holiday spending, however it is only for your holiday spending. The Cash Returns Card will give you 5 percent cash back on all your purchases for the first 3 months. Anything purchased after about Valentine’s Day will only earn 1 percent; get that gift early.

If you’re not just looking to score a deal for the holidays there are many other cards available for long-term earnings.

When driving around and eating out is more your lifestyle, the Citibank Professional Cash Card offers 3 percent cash back at restaurants and gas stations, and if you drive a rental car you can even get 3 percent back on that too. Plus, you’ll get 1 percent for all your other purchases.

A similar card is the Citibank Dividend Card. You will earn 2 percent on purchases made at supermarkets, drugstores, gas stations, convenience stores, utilities, and cable along with 1 percent on everything else.

Over at Capital One the newest cash rebate card, No Hassle Cash Rewards, is for 1 percent cash back. With this card the upfront rebate is lower but the imaginative addition to this card is that on Halloween every year you will receive a 25 percent bonus on your earnings. That’s not scary. If in the year you charged $20,000 you would have a $200 rebate. With the bonus you would then get an additional $50.

Discover Card, the originator of the cash back program, offers 5 percent cash back all the time on something and 1 percent on everything else. The program is called Get More and every three months the category for the 5 percent cash back changes. The categories include travel, home, gas, restaurants, movies and more.

Also changing your cash back categories is the Freedom Card from Chase. But these changes are done every month to your benefit and you don’t have to do a thing. There are 15 categories for spending and whichever 3 groups you spend the most money on in the month, those will be your 3 categories. So even if you spend more on gas, groceries, and dry cleaning one month, and at drugstores, on utilities and at the veterinarian the next-you’ll automatically earn 3 percent cash back in your top 3 spending categories. Everything else will earn you 1 percent.

American Express has a card available called Blue Cash that advertises up to 5 percent cash back. It is worth mentioning because a lot of people fall over its complex rebate tiers. To explain it simply and quickly, with this card you will earn 1 percent at supermarkets, gas stations and drugstores and .05 percent on all other purchases. Only after you have charged $6500 will you earn 5 percent at supermarkets, gas stations and drugstores. That calculator is reset every year.

One of the best cards for your everyday use and made even better if you drive a lot, is called Driver’s Edge from Citibank. It offers 3 percent cash back on gas, supermarket and drugstore purchases and 1 percent for everything else. A unique addition to this card ties into the cards name: Driver’s Edge. This card actually gives you a penny for every mile you drive. Anytime you have service work done, like an oil change, send a copy of the receipt with the odometer reading to Citibank and they credit your account for the miles. A penny may not seem like a lot, but when you drive 25,000 miles a year, that equals an extra 250 bucks in addition to the 3 percent you’re getting back on all that gas. In a few years that’ll pay for your new tires and a brake job.

Driver’s Edge is not an actual cash back card, but since it is one of the best cards available, it is worth mentioning. The rebates you earn can only be used for service maintenance on your car or the purchase or lease of a car. Even though you are limited to using the money for maintenance work-doesn’t the car always seem to need an oil change or something more?

The small print!

Should you sign up? Not without first understanding the difference between what is advertised and what is in the fine print. Secondly, credit cards and their issuers have gotten a lot of bad publicity because of people blaming their problems on them. The fact is companies are not at fault for the spending habits of their customers.

There has been a lot of attention paid to credit cards recently as debt estimates have been exaggerated, and some have gone so far as to call credit cards evil. They are dangerous, not evil. If you are a mature, responsible and educated person, there are many benefits to using credit cards that will be outlined in a coming article.

Thousands of people charge thousands of dollars a day and get cash back, free airline tickets, free hotel stays, free movies-all with the simple process of swiping a piece of plastic. Why are these people able to handle their credit properly and carefully and others not? It has nothing to do with the company or the card that they use; it has everything to do with the individual using it.

If you are not going to use them responsibly, be it as a way to pay for things with simple convenience, take the rewards and benefits cards offer, or as a strategic financial tool, then you shouldn’t use them.

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