Maximize Your Holiday Shopping with the Right Credit Card

At O1ne Mortgage, we understand the importance of making informed financial decisions, especially during the holiday season. This time of year presents a unique opportunity for credit card holders to leverage their card benefits to save money, earn rewards, and enjoy certain protections. In some cases, opening a new credit card can help you maximize the value of your holiday spending. However, it’s crucial to consider whether you can qualify for the card you want, the benefits it offers, and how you’ll manage the new account. Here’s what you need to know before opening a new credit card for the holidays.

5 Reasons to Get a Credit Card for Holiday Shopping

Americans tend to spend more during the holiday season, whether it’s on gifts, parties, family gatherings, or other major expenses. Getting a new credit card could help you make the most of your holiday costs. Here are some specific reasons why you might consider getting a new credit card for the holidays:

1. Intro Bonus

Many rewards credit cards offer introductory bonuses when you open a new account and meet a minimum spending requirement. These bonuses can range from $100 to upwards of $1,000, with spending requirements from $500 to $5,000 or more. If you’re thinking about getting a new credit card for its intro bonus, make sure you can afford to meet the spending requirement with your holiday and everyday expenses. Overspending to earn rewards can neutralize or even negate the value you get.

2. Rewards

Each rewards credit card has its own structure for how you earn cash back, points, or miles. Some may offer a flat rate on all spending, while others may give you accelerated rewards rates in certain spending categories, such as groceries, dining, gas, online shopping, and more. If you’re not satisfied with your current credit card’s rewards program or want to take advantage of your upcoming expenses to rack up more rewards, review your budget to determine which card would offer the most cash back, points, or miles on your general spending, not just on holiday-related expenses.

3. Interest Promotion

Many credit cards offer an introductory 0% APR on purchases, which can last anywhere from six to 21 months, depending on the card. If your budget is tight and you don’t want to end up with high-interest debt, an intro 0% APR card can give you some time to pay off your balance interest-free. Just be sure to have a plan for paying off the debt before the promotional period expires to avoid expensive debt.

4. Protections

Some credit cards offer various shopping-related protections that can be especially beneficial during the holidays. Potential options include:

• Purchase protection: Provides reimbursement for eligible items that are stolen or damaged within a set period after the purchase.
• Return protection: Reimburses you for eligible items that you’ve tried to return but weren’t accepted by the retailer.
• Extended warranty: Extends the warranty period beyond what the original manufacturer offers.

Keep in mind that these benefits typically come with fine print, including limitations and exclusions, so make sure you read through that before choosing a card.

5. Credit Building

One of the biggest benefits of a credit card is that you can use it to build your credit profile without ever paying interest. Simply use your card for everyday purchases and pay it on time and in full every month to build a positive payment history and avoid interest. Of course, you don’t have to pay in full to get the credit benefits, but doing so helps you avoid high-interest debt. If you’re thinking about getting a card for this purpose, make sure to avoid racking up too high of a balance. Your credit utilization rate, or the percentage of your card’s limit that you’re using at a given time, is a major factor in your FICO® Score, and it’s best to keep it as low as possible.

4 Reasons to Think Twice About Getting a New Card

While there are clear benefits to getting a new credit card for the holiday season, there are also reasons to be cautious:

1. You May Not Get the Card You Want

The best credit cards on the market typically require good or excellent credit, which means that if your FICO® Score is below 670, you may have difficulty getting approved. Applying for a card that you’re not qualified for may result in an unnecessary hard inquiry on your credit report, which can take a few points off your credit score. It may be best to wait and build your credit before you apply.

2. You May Overspend

If you’ve had a hard time sticking to a budget in the past, getting a new credit card could pose too much of a temptation to continue to overspend. Even if you can earn an intro bonus, the additional debt and interest could wipe out any value you gain from the card.

3. It Can Hurt Your Credit

If you don’t manage your credit card well, it could end up doing more harm than good to your credit score. This is particularly true if you miss a payment or regularly rack up a high balance relative to your credit limit.

4. It Can Affect Other Financing Needs

If you’re planning on applying for a mortgage or car loan in the near future, it’s generally best to avoid opening new credit accounts until you’ve closed on that loan. This is especially important if your credit score is close to a lender’s minimum.

How to Choose a New Credit Card

If you decide that getting a new credit card is right for you, it’s important to focus on the type of benefits you want, your spending habits, and your credit score.

Choose a Card Type

Here are some of the more common types of credit cards available:

• Cash back credit cards
• Travel credit cards
• Intro 0% APR credit cards
• Balance transfer credit cards
• Store credit cards
• Student credit cards
• Secured credit cards

Note that while store credit cards can be tempting when you’re out shopping, they typically don’t provide as many benefits as traditional cards. They can, however, be beneficial if you plan to do much of your shopping at one particular retailer.

Understand Your Spending Habits

Review your spending over the past two or three months to get an idea of how you spend your money. Then, try to find a card that will reward you the most based on your top spending categories.

Check Your Credit Score

While the best credit cards are typically reserved for people with good or excellent credit, there are options available for consumers with fair or even bad credit. Make sure you know what a credit card requires before you submit an application.

Get Matched With Cards Based on Your Credit Profile

It’s important to check your credit score before applying for a credit card, but it can still be difficult to know what card issuers require. With a feature from Experian, you can get personalized credit card offers based on your credit profile without any impact on your credit score. This tool can help you find the right card for you or simply help you get started on your search by helping you determine which types of cards you’re eligible for.

At O1ne Mortgage, we are committed to helping you make the best financial decisions. If you have any questions or need assistance with your mortgage needs, don’t hesitate to call us at 213-732-3074. Our team of experts is here to help you navigate your financial journey with confidence.