You may be among the millions of Americans who will charge their holiday shopping expenses this year, but that's not necessarily a bad thing. When used correctly, credit cards can be a useful financial tool and can even pay you for using them in many cases.
Here are two questions to ask yourself before deciding what credit card to use.
Can you pay it off quickly?
Basically, there are two main types of credit cards to look at: those with good rewards programs, and those with low interest rates. If your card doesn't have at least one of those characteristics, you may need to get a new one.
If you think you'll be able to pay off your holiday purchases fairly quickly -- in a few months or less -- then finding the best rewards should be your priority. And, as I've written before, the "best" rewards depend on your particular lifestyle.
For example, if you travel frequently, a card that offers frequent flyer miles or hotel points might be the best choice for you. The Delta SkyMiles Gold American Express card and the Capital One Venture Rewards card are good examples. Generally, you get one mile per dollar on purchases, but savvy travelers know how to stretch their value.
If you shop frequently in the store where you plan on doing much of your holiday shopping, it may be worth checking out the store's credit card programs. Many department store credit cards offer rewards on in-store purchases that other credit cards simply can't match.
For example, the Best Buy Reward Zone Master Card offers up to 5% back on Best Buy purchases and has at times offered "10% reward" promotions.
Do you want to take your time?
If you want to pay off the balance over several months or more, the priority shifts to the lowest interest rate possible. After all, even if your credit card gives you an excellent reward rate of 5%, if you're paying 18% interest, it takes only four months before the interest costs more than your rewards are worth.
Sure, most department stores have their own 0% financing deals, but each one of those requires a separate credit application. And having too many of those can ding your credit score.
You're better off using just one card for all of your shopping. It's easier to keep track of, and there is certainly no shortage of 0% introductory rates out there. For example, the Chase Slate card and the BankAmericard Visa card both offer 0% APR for 15 months, as well as no annual fee.
Maybe you can have both...
If you shop around, you should be able to find a card with both excellent rewards and 0% introductory interest. Bear in mind, however, that you'll probably need very strong credit to qualify for the really good ones.
For example, the Discover It card currently offers 0% APR for 14 months, as well as 5% cash back on the first $1,500 in purchases at any department store before the end of the year. The American Express Blue Cash card has a six-month 0% APR offer and offers 3% cash back on supermarket purchases and up to 2% in other stores.
According to Credit Karma, both of these cards require excellent credit.
Should you apply for a new card or use the ones you already have?
It's not a terrible idea to open a new card every year or so to take advantage of reward programs and introductory APR offers. If you pay off the balances before the interest kicks in, you could never pay interest on credit card purchases again and build yourself up a nice stash of rewards in the process. Plus, having new inquiries once a year isn't likely to affect your credit score at all.
The bottom line is to take advantage of what's out there to make your holiday shopping a painless and "rewarding" experience.
Matthew Frankel owns shares of Bank of America. The Motley Fool recommends American Express, Bank of America, MasterCard, and Visa and owns shares of Bank of America, Capital One Financial., Discover Financial Services, JPMorgan Chase, MasterCard, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.