The average American consumer plans to spend $935.58 during the holiday shopping season, and holiday season retail sales are expected to increase by 3.6% over last year to a total of $655.8 billion. Since a lot of that spending will be done on credit cards, and because credit card offers and rewards have never been more generous than they are right now, here's a guide to some of the best credit cards for your 2016 holiday shopping.
Rewards and bonuses are better than ever
As I mentioned in a recent article, there has never been a better time to get a new credit card than right now. Competition in the industry is higher than ever, and credit card companies are offering some great perks to try and attract business.
For example, the Chase Sapphire Preferred Card is offering a 50,000-point bonus after $4,000 in spending in the first three months. This translates to $625 in travel, or can be redeemed for a $500 statement credit to offset your holiday purchases. And the $95 annual fee is waived for the first year.
The Capital One Venture Rewards Card offers a 40,000-point bonus with a lower $3,000 spending threshold. It also has a lower ($59) annual fee than the Chase card, which is also waived for the first year, and earns a higher reward rate -- two miles per dollar on every purchase.
If you're not worried about an introductory bonus, check out the Citi Double Cash Card. The card offers a 2% cash back rate on all purchases -- technically 1% when you use the card and another 1% when you pay the bill. There is no annual fee, and the card offers an 18-month 0% APR period for balance transfers.
Do you want more time to pay?
If you want to take your time paying for your holiday shopping, it doesn't get much better than the Citi Simplicity Card, which has no annual fee and an industry-leading 21-month 0% APR introductory period for purchases and balance transfers. To put this in perspective, this means that if you get the card in December and charge gifts, you can pay in full by September 2019 and not pay a penny in interest. The card also has no late fees and no penalty APR for late payments.
Beware of store card "no interest" deals
Many store credit cards offer interest-free financing deals that sound much better than anything offered by a standard credit card. You may see signs saying "60-months no interest" in the windows of furniture stores or "12 months same as cash" at your favorite retailer.
These can certainly be great deals, if you pay the balance down before the no-interest period ends.
Unlike standard credit cards, store cards use a form of financing called deferred interest. This means that interest is accumulating from day one, and will be tacked onto your balance if your account isn't paid in full by the end of the promotional period. Store cards tend to have high interest rates -- many in the neighborhood of 29% -- so this can result in a big charge.
Choose rewards that make sense for you
So far I've only discussed credit cards with perks that appeal to all shoppers -- cash back, 0% interest, etc.
It's also worth mentioning that some travel, hotel, or store-specific rewards cards might offer excellent rewards that have a lot of value to you, ifthey fit your lifestyle. For example, my Best Buy Visa Card gives me 5% back on purchases at Best Buy and I regularly receive 10%-back offers for certain times throughout the year. I shop at Best Buy often, so keeping this card in my wallet makes sense for me.
Another favorite offer on the market right now is from the American Express Platinum Delta Sky Miles Card, which is offering a limited-time bonus of 70,000 miles and 10,000 Medallion Qualification Miles (that help you earn elite status) after $3,000 in spending during the first three months. This card does have an annual fee of $195, but entitles the cardholder to free checked bags on Delta flights and a companion certificate each year, good for a buy-one-get-one domestic coach ticket.
This is a great example of a card that has an excellent offer, but only fits certain lifestyles. If you're a frequent flyer, this card could be well worth the annual fee. If you don't travel much, you're better off with one of the cash-back cards I discussed.
The bottom line on holiday shopping with credit cards
To be clear, I'm not advising you to spend more than you otherwise would just for the sake of getting a big introductory bonus. Rather, the point is that you could get some pretty impressive rewards or interest-free financing for money that you were going to spend anyway.