Paying for Black Friday and Beyond: Card Strategies for the Holidays

Black Friday and its online sibling Cyber Monday are upon us again. The ads are everywhere and the preview circulars are available online. Just as you are creating your plan of attack for the wee hours of November 27th, you would be wise to consider the various payment options for your purchases.

Should you use cash or credit card – or some combination of both? Which card is best for which purchases? And, what about your phone, should you finally try out Apple Pay? You also need to be thinking beyond the point of purchase. What can you do to mitigate the risk of compromised plastic? And how can you avoid buyer’s remorse?

While every person has unique needs and shopping styles, there are some common, valuable strategies for selecting and using credit cards during the holidays – both in-store and online. Given the (slowly) growing popularity of new mobile wallet options – Apple Pay, Android Pay and Samsung Pay – I have also included a few things to consider when using them in lieu of credit cards.

The Basics

Credit and debit cards are some of the best financial tools of the past 70 years. They provide flexibility to manage cash flow and allow access to credit. But they can be easily abused and lead to significant personal debt. Managing your cards means planning your payment for each card statement and only spending what you can afford.

The Strategies:

The following seven strategies are designed to help you optimize your holiday spending without being buried by a mountain of debt or the hassle of a stolen card.

#1. Use cards instead of cash. Cards have a number of advantages for your holiday shopping:

• It may be easier to return an item/get a refund, if you paid with a card. Retailers can often use your card to look up your purchase for a return or refund if you have lost the receipt. And in some cases, your bank can help you dispute the transaction if you have a problem with the merchant.
• You get to use the bank’s money for a few days instead of your own.
• Cards have consumer fraud protection rights for you.

#2. Use your credit card instead of a debit card – generally. However, there are times when you should use your debit card. Use your debit card if:

• You don’t have the discipline to pay your credit cards in full!
• You need to get cash back on a transaction (less expensive than a credit card cash advance or out of network ATM charges)
• The merchant gives a discount for using the debit card.

#3. Do leave home without most of your cards. Set a budget and carry only a single card when you go shopping. Leave the rest at home. This will help you stick to your budget. Additionally, if your purse or wallet is compromised or stolen, you only have that single account to worry about. If possible, put all your recurring transactions on a separate account and leave that card at home. You want to minimize the chance that you will have to reestablish those recurring transactions if the stolen/compromised card has to be reissued.

#4. Avoid getting a new card on impulse. Resist the offer to sign-up for a store credit card at the checkout, even if it offers a discount on the items you are buying. These offers may be a great deal, but you should take the application home and carefully consider the offer against your existing card accounts. A new card will affect your credit score and should not be an “impulse buy.”

#5. Embrace the chip. Banks have reissued millions of new “chip” cards in the past year that help reduce certain kinds of fraud. You should assume that the merchants’ Point of Sale (POS) devices will be updated to accept the chip. Instead of swiping the magnetic stripe, you will need to insert the plastic into a slot on the POS device. It will take a couple of seconds to complete the transaction. Be patient.

#6. Use your mobile wallet if available. Apple Pay, Android Pay and Samsung Pay are alternative payment options if: (1) you have one of the newer smart phones, (2) your bank allows you to put your cards on the wallet and (3) the merchant accepts mobile wallet transactions. These mobile wallets have several advanced security features aimed at reducing fraud (e.g., fingerprint scanner to authenticate you are making the transaction and/or using a separate account number (that is a token) for your mobile wallet transactions, etc. However, there are some new hazards regarding mobile wallets, so keep these things in mind to minimize the risks:

• Keep your phone safe. Always assume that someone in the crowd might be looking to steal your phone.
• Always use a password to unlock your phone. Longer passwords are better.
• Install a good anti-virus program and know how to use it to remotely find or lock your phone should you lose it.

#7. Cyber Monday is every day. More people are avoiding the crowds all together and doing their shopping online. But don’t let convenience outweigh the risks. It’s best to follow these precautions when shopping online:

• Stay on well-known sites. Don’t follow links in emails to “great deals.” Type web addresses directly or use popular search engines (e.g., Google or Bing) to get to them.
• If you have to go to a new online store, be sure to check for a secured checkout (https:// with a padlock).
• Always use strong passwords. Don’t reuse any of your existing passwords at a new online store. Again, longer passwords are better.
• Use your credit card or a payment service connected to a credit card (e.g., PayPal, Visa Checkout or MasterPass).
• If you decide to use your phone to shop (instead of your home laptop), don’t use public Wi-Fi. Use your phone provider’s data service instead.

The bottom line: credit cards can be a great tool in your financial toolbox, but you have to use them appropriately and avoid potential pitfalls. Don’t use credit cards to fund a lifestyle to which you would like to become accustomed or to lavish friends and family with gifts you can’t afford. No matter how good the door-buster deal is or how many reward points you rack up, it’s not worth starting the New Year in serious debt.