A new TV set discounted to $499, 50 percent off kitchenware, those coveted boots for just $40—it sounds like a steal, maybe even one worth racking up a little bit of debt for. But with an average credit card debt of more than $15,000, is paying with plastic really worth it? Here are four ways to make sure you’ll stay out of debt during the holiday shopping kickoff:
1. Pay with cash. The best way to avoid putting money on your credit card? Don’t bring your credit card. Paying with cash gives that visceral feeling of forking over money, making you more aware of your purchases than an electronic transfer ever could. Other options include using your checking account—but be sure to opt out of overdrafts and any overdraft protection services, just in case you overspend—and purchasing gift cards if you know ahead of time what stores you’ll be frequenting.
2. Take advantage of return and purchase protection. If you decide to use credit cards, many cards offer purchase, return, and warranty protection. For example, if a merchant refuses to accept a returned item, your credit card network may pick up the tab. However, these protections vary widely by card, so be sure to check your terms and conditions before deciding which card to use.
It’s worth noting that the prepaid American Express Bluebird offers purchase protection as well, and unlike many other prepaid debit cards, there are very few fees: There’s a $5 in-store purchase fee, which you can avoid by ordering the card online, and a $2 ATM fee if you don’t use direct deposit. The Bluebird offers a low-cost way to get the benefits of purchase protection without the danger of a line of credit.
3. Look for 0 percent financing offers. Again, if you’re going to use a credit card, do it right. While many stores offer 0 percent financing on your purchases, you don’t have to pay interest for, say, six months. (Some will charge interest retroactively if you don’t pay in full.) For example, if you make a $500 purchase and pay off all but $100 in the six-month financing period, you could be stuck paying interest on the full $500. Credit cards with no interest, on the other hand, will only charge you interest on your remaining balance.
4. Don’t open a credit card account on impulse. While many stores offer their own credit cards—some with juicy offers like 20 percent off your purchase—you might find yourself paying a lot more than you intended. Store credit card interest rates are often higher than other credit cards’, so unless you have good credit and the ability to pay off your bill in full, avoid signing up for a card just to get the bonus. Before Black Friday, check out a few card offers online and make a careful decision about whether you can reasonably open the account.
Anisha Sekar is the vice president of credit and debit products at NerdWallet.com, your source for the best credit card offers this holiday season.