Three reasons why credit cards are better than cash for holiday shopping

The conventional wisdom around holiday shopping insists that paying with cash is always the best option. While this notion isn't 100 percent wrong, if you're a disciplined shopper with enough cash to cover your holiday purchases, then you're better off using credit cards. 

|
Reuters/Jonathan Bainbridge/File
All major credit cards provide some degree of warranty protection for items purchased with their cards and there's always the option of getting reward points.

You hear a lot about the evils of credit cards these days, and the conventional wisdom around holiday shopping insists that paying with cash is always the best option.

That conventional wisdom is wrong.

Well, perhaps it’s not 100% wrong, but it’s vastly oversimplified and overhyped. The stone cold truth about credit cards is that if you’re a financially disciplined shopper with enough cash to cover your holiday purchases, then you’re actually much better off to put those purchases on a credit card - and then use the cash to pay off the cards.

Here’s why the extra steps are worth it.

Extended Warranties

Back in 2006, I bought a fancy television. Of course, it broke when it was less than a year out of the one year warranty. Then I remembered that I had put the TV purchase on my American Express, and that meant it was eligible for extended warranty protection.

All major credit cards provide some degree of warranty protection for items purchased with their cards. The usual benefit is to double the length of a manufacturer’s warranty for up to a max of one year. The finer details, like eligible items and warranties and maximum item price, vary from one card to the next, but those generally only come into play on very expensive items or items most people would not normally charge to a credit card, like boats and cars.

In the end, American Express reimbursed me for the full purchase price from two years earlier, just over $2,000. By then, similar TVs were available for much less, and in the end I replaced my TV and pocketed nearly $1,000.

Had I paid cash for that TV, I would have been entirely out of luck.

Price Drop Protection

How many times have you thought you were getting a great deal on something only to see it on sale a week later? You can’t return an item after a certain number of days have elapsed, or if you’ve already thrown out the packaging and used it. Sometimes returns are explicitly not allowed. If you’re lucky, the store you purchased it from might agree to a price adjustment, but you generally will find yourself stuck.

However, if you charged that purchase, you may be able to get a price adjustment through your credit card.

Discover offers price protection with a maximum refund of up to $500 if a lower price is published within 90 days of your purchase. For Citi cardholders, there’s Price Rewind with a maximum reimbursement of $250 when the difference is at least $25 and published within 30 days. And Mastercard refunds up to $250 per claim within 60 days. Exclusions and other conditions vary from one card to the next.

One of the best uses I’ve ever seen of this benefit was when a member of my team used Citi Price Rewind to snag an iPad that we knew would be marked down for Black Friday last year. The ads are available well ahead of the sale, so all he had to do was buy it early inside that 30 day window and file a claim with Citi.

Rewards Points

I’m a big advocate of traveling on reward points, and I’ve taken some pretty incredible vacations spending hotel points and air miles. Even if you’re not a hard core travel hacker, it’s silly not to think of holiday spending as a golden opportunity to pocket a bunch of extra points. According to the National Retail Federation, the average shopper spent $730 on holiday purchases like gifts, food and decorations. Using a Chase Freedom today for online holiday shopping, department stores, and at Amazon would earn 5x cash back totaling as much as $36.50. Whatever rewards card you prefer, holiday shopping is an opportunity. Take advantage of it.

I’m not advocating going into debt, and these cardholder benefits are really only worth something if you’re paying the cards off in total right away. But my point stands - if you have the ability to pay cash for a holiday gift, then paying with a credit card generally offers a much better deal.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Three reasons why credit cards are better than cash for holiday shopping
Read this article in
https://www.csmonitor.com/Business/Saving-Money/2014/1222/Three-reasons-why-credit-cards-are-better-than-cash-for-holiday-shopping
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe