When it comes to holiday shopping (and all shopping, for that matter), not all credit cards are created equal. But choosing the best credit cards for making your holiday purchases depends a lot on what sort of shopper you are. Are you using plastic because you don’t have enough cash to pay for everything on your shopping list? Are you mainly in it for the rewards? Are you looking to get warranty coverage from your card?
We spoke to a few credit card experts to identify the best kind of card for every kind of shopper — as well as one holiday credit strategy you should try to avoid.
Best for the Buy Now, Pay-Later Shopper: Citi Simplicity
If you’re charging holiday purchases because you don’t have enough money to buy everything on your shopping list, you’d do well to aim for a card with the lowest APR. In which case, why not just aim for one with no APR at all? Erik Larson, president of consumer advice site NextAdvisor, says that shoppers who can’t pay for their purchases now should consider the Citi Simplicity card, which offers 0% APR for the first 18 months. That means that even if you haven’t gotten your cash flow under control by next year, you can charge your 2013 holiday purchases and still have six months to pay them off before the 12.99% to 21.99% variable APR kicks in.
Best for the Already-in-Debt Shopper: Chase Slate
Of course, if you took the charge-now-pay-later approach last holiday season, you might be heading into this one already carrying a hefty debt load. If that’s the case, you may want to look into a good balance transfer card that will allow you some breathing room.
Odysseas Papadimitriou of CardHub.com recommends the Chase Slate card, which has 0% APR for the first 15 months and waives the fee for balance transfers in the first 60 days. That means you can transfer over your existing debt and then pay it off at your own pace without swimming against the current of accumulating interest payments.
Best for the Rewards-Seeking Shopper: Discover More Card
Your typical rewards card offers 1% cash back year-round, plus bonus categories that rotate every quarter. And Discover More’s bonus categories for the last quarter of 2012 make it a clear choice for rewards seekers.
“If you’re really concerned with getting the most cash back for the holidays, the Discover More card is great there,” says Larson. “It’s the only one that has the bonus cash back during holidays for online shopping.”
That’s right: For the rest of the year you get 5% cash back on all online purchases, not to mention in department stores. That’s effectively an automatic 5%-off coupon at most places you’ll be shopping this holiday season.
Best for the Play-it-Safe Shopper: Chase Sapphire Preferred
If you’re going to be spending hundreds of dollars on gifts, it would be nice to get some protection on those purchases. Fortunately, some credit cards offer exactly that.
Gerri Detweiler, personal finance expert for Credit.com, recommends the Chase Sapphire Preferred card. Its purchase protection will pay to repair or replace damaged merchandise within 90 days. If the product has a manufacturer’s warranty of three years or less, it will double that repair period by up to an additional year (in other words, a six-month warranty will be doubled to a year, while a one-, two- or three-year warranty will get an additional year of coverage). If the retailer won’t accept returns within 90 days, the issuer will reimburse you. And if you find a lower price within 90 days, you’ll be reimbursed the difference.
The downside is that it has a $95 annual fee, but that’s waived for the first year. And it also comes with some very nice rewards to justify the fee, including double points on restaurants and travel and 40,000 bonus points when you spend $3,000 in the first three months.
The Loyal Shopper: J.C. Penney Card
Retailer-branded credit cards often have high interest rates, and if you get in the habit of signing up for a store card every time a cashier offers you a discount on your purchase, you’re going to wind up hurting your credit score.
Still, if you’re a loyal shopper at a given retailer and you’re buying enough merchandise that the sign-up discount is substantial, then you might consider it.
“I only consider a retailer’s offer if I’m going to pay in full at the end of the month and I’m going to get a big discount,” says Papadimitriou. “J.C. Penney’s card gives you 20% off the day you’re approved on most items, and 10% off jewelry, watches and home merchandise.”
Just make sure you pay off your balance every month, or you’re looking at a 26.99% APR.
And Now for the Bad Idea: Deferred Financing
When considering retailer cards, note that many of them come with one feature that you should avoid like the plague: deferred financing plans.
Like the Citi Simplicity Card, these allow you to charge your purchase but put off paying interest for a period of time. But they come with one little quirk that can make them disastrous: If your balance isn’t paid off in full by the end of the deferred financing period, you’ll be charged interest retroactive to the time of your purchase.
Take this Home Depot card, for instance – you can effectively get a six-month interest-free loan for home improvement on all purchases over $299, and on certain categories of merchandise that period is extended to a year. But if you’re a day late paying off the balance, you’ll suddenly be hit with interest going all the way back to the date of purchase.
“This is something that most consumers would not even be aware to look for in the fine print,” says Papadimitriou. “My number-one advice is to avoid financing your holiday purchases with retailers’ financing plans.”