Use credit and gift cards for holiday shopping

Credit Card, Debt, Shopping, E-commerce, Retail, Credit Crunch
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Most shoppers plan to shop online to complete their holiday gift shopping. In fact, it's almost a necessity because retailers will be stocking lean inventories, so expect popular items in stores to run out fast, making shopping online the only way to get some items.

One of the most popular activities is browsing for gift ideas and comparing prices. The payoff is time saved by avoiding traffic jams, parking lot hassles and crowds at the mall. Using price comparison apps on smart phones is also a popular money-saving tactic. When folks shop online, studies show they also save money by avoiding eating out, which is a big added expense of those holiday shopping trips.

Credit Cards

When doing your holiday shopping, I strongly suggest using a credit card, especially for purchases online. There are several very compelling reasons for this. First, only credit cards provide consumer protections under the Fair Credit Billing Act.

Under this federal law, your liability for fraudulent or disputed charges on credit cards is limited to $50 and you have the right to dispute charges and withhold payment while the charge is investigated. Also, if the merchandise delivered is defective or not in the condition "as agreed", you have the right send it back to the merchant and deny the payment to them. (Try getting your money back from a bad-tempered merchant after you've paid by a check...)

Also, even though banks advertise that their debit cards provide comparable protection, they are not required by law to do so. Your liability for fraudulent charges on a debit card can be as high as all the money in your account and your credit line, depending on when you report the fraudulent or disputed charge.

Finally, many credit cards also provide benefits such as requiring merchants to exchange or replace defective or damaged merchandise, protection against no return policies and extension of manufacturer's warranty. This is particularly valuable when buying and shipping fragile gifts (such as a digital camera or a tablet computer) to your family across the country.

Gift Cards

If you are still holding on to gift cards received in the past, now is the time to use them. Buy gift cards for things the person will use immediately. Also, be careful not to buy gift cards where the security number on the back has been exposed. Look for gift cards held in a safe location behind the counter. Thieves can write down gift card numbers and monitor your card online, quickly accessing the card when activated and draining its value by making their purchases before the gift card owner is aware of it. Look out for these common gift card scams.

Finally, check into the gift card fees before you buy. Fees are typically posted on the gift card sleeve or on the website. Buy gift cards with no issuance fees, no expiration dates and no maintenance fees. Again, gift cards issued directly by retailers typically have the best fee terms.

And if you receive a gift card, use it promptly - not only to avoid possible maintenance fees and expiration, but also to take advantage of post-holiday discounts.

If you have a holiday shopping tip that has worked for you, please share your suggestions in the comments below!

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.