Tread carefully when navigating credit card offers

If you're the one dishing out the dough for that bag of toys this holiday season, be sure your “naughty and nice” review list includes credit card offers. Most have some of each.

First, let's look at the growing number of nice deals being dangled.

• Create holiday jingle through credit card rewards.

At my house, Santa has been known to shop where credit card rewards can be used to fill that sleigh.

Odysseas Papadimitriou, CEO of CardHub.com, noted that some credit card companies offer more value if you redeem reward points for gift cards instead of cash. By his calculation, the Citi ThankYou Points are 37 percent more valuable when redeemed for gift cards.

Act early in the season to allow time for the plastic to be shipped.

Some issuers, like Citi ThankYou, also offer online gift cards that can be redeemed and used immediately with select retailers.

At Amazon.com, Discover card members can use their cash-back bonus points at checkout with a link to their Amazon account.

Some issuers have holiday specials, too. American Express is offering its members five $10 gift cards for 4,000 points for Bath & Body Works cards — save 1,000 points — through Dec. 31 or while supplies last.

• Extra rewards — and 0 percent balance transfer offers — make some credit card offers look as good as getting 50 percent off on a flat-screen TV.

“Rewards cards are coming out with some really good bonuses right now,” said Beverly Harzog, credit card expert for Credit.com in Atlanta.

The Chase Freedom Visa, for example, offers new card holders $200 cash back if they spend $500 during the first three months of holding the card. Purchases don't include using your account for balance transfers or cash advances, or using any checks that access your account.

This is a one-time bonus offer that's only good for first-time card members with new accounts. After qualifying, allow six-eight weeks for bonus points to post.

The card's annual percentage rate isn't low, though. It can range from 15.99 percent-22.99 percent — depending on creditworthiness.

Many cards also offer special deals during the holidays.

Chase Freedom Visa, for example, offers 5 percent from October through December on spending for dining, department store shopping, movie theaters and contributions to charitable organizations.

Discover has a new program with Amazon.com that offers card members a 2 percent cash-back bonus on up to $250 in Amazon purchases each billing period through 2011.

Typically you do not want to carry a balance on a rewards card. The rewards earned won't offset 15 percent or 20 percent annual percentage rates.

Now, the naughty list:

• That 0 percent transfer deal can become a big lump of coal if you don't pay attention to the fees and rules. Would you pay 3 percent — or $150 — to transfer $5,000? How about 4 percent?

Consider the Chase Slate Card with Blueprint Visa, which has a 0 percent rate on purchases and balance transfers for 12 months.

No transfer fee is charged at first. But read deeper into the rules: After 30 days, you'd pay either $5 or 3 percent of the amount of each transfer, whichever is greater.

Papadimitriou, of CardHub.com, said consumers must pay attention to whether the 0 percent rate applies to a balance transfer and purchases. Some deals only apply to transfers. Some card offers, he said, have a higher rate on purchases or apply the 0 percent rate for 12 months to the transferred balance, but for just six months on purchases.

• Pulling out too much plastic can be as bad as re-gifting last year's Snuggie.

It's easy to give into temptation and buy a $50 jacket on credit — and then throw another $12 on the card for a glittery pin that's marked half-off at the register. Even if you pay off that card each month, as I do, the extra baubles add up.

It's worse if you're among the 6 percent of consumers — or 14 million shoppers — who still haven't paid off last year's holiday credit card bills.

“If you're currently running a balance, I don't think it's a good idea to add to it with holiday shopping,” said Bill Hardekopf, CEO of LowCards.com.

What's another $12 or even $25?

Well, let's say you put $25 worth of impulse purchases onto your plastic each day from Thanksgiving until Dec. 31.

You'd spend an extra $950. And if you only make the minimum payments, it's going to take six years and, if your card has an annual interest rate of 15 percent, $501 in interest to erase that debt. You probably won't even have most of your “impulse buys” by the time you're done paying for them.

Holiday spending rarely stops on Dec. 25. Many of us return to the stores after Christmas to use gift cards, return stuff or hunt for markdown bargains.

“They'll go in the store with the best intentions,” warned Lynnette Khalfani-Cox, a co-editor for CardRatings.com.

But they come out with bags of more stuff — and more dings on the plastic.

We've got Black Friday — and now Gray Thursday as stores open for part of Thanksgiving.

We don't need Jan. 1 to be “Deep-in-the-Red Sunday.”

A HOLIDAY GAME PLAN FOR PLASTIC:

• Make sure the rewards cards are filled with goodies.

One pick: A Fidelity Investments Rewards American Express card that can build up a 529 college savings or retirement account. No points are earned on balance transfers, though.

John Ulzheimer, president of Consumer Education at SmartCredit.com, said he likes the IRA or 529-related Fidelity cards for consumers who have good credit. The credit limits can be set high, which could help your credit score. A consumer isn't likely to use 30 percent or 40 percent of the available credit with a limit of $35,000 or more.

• Pay attention to extra holiday reward deals.

Some holiday deals might work well; others won't. It depends on what you plan to buy — and where you shop.

The Amazon.com Rewards Card from Chase offers 10 reward points for every dollar spent on all downloadable digital purchases at Amazon.com through Dec. 31. Eligible purchases on Amazon.com include: Kindle e-books, Amazon MP3s, game downloads, software downloads and other items. Ongoing rewards include three points for every $1 spent on Amazon.com purchases and two points for every eligible $1 spent at gas stations, restaurants, drug stores and office supply outlets.

• Avoid the temptation to load up on retail store plastic.

Retail store cards can hurt consumers in two ways, Ulzheimer noted. First, he said, store credit cards often have high interest rates well into the 20 percent range. On top of that, he said, credit limits on store cards often are very low. Charging $900 on a store card with a limit of $1,000 drives up your balance-to-limit ratio and could hurt your credit score.

TEMPTATIONS TO AVOID:

A slice of pumpkin pie or an extra sliver of nut bread won't be the only things tempting you this holiday season.

Credit card issuers are dangling all kinds of sweet deals to get you to spend — and spend some more.

The 0 percent balance transfer offer, for example, is as hot as one of those dark chocolate molten lava cakes — and oozing with more temptation.

“They are just everywhere, aren't they?” Beverly Harzog, credit card expert for Credit.com in Atlanta, said of the introductory pitches.

Some this year go well beyond 6 months or 11 months.

One such offer: The Citi Diamond Preferred Card has a 0 percent introductory annual percentage rate on balance transfers and purchases for 21 months.

There is, however, a fee on the amount of debt moved to the new card — $5 or 3 percent of the amount of each transfer, whichever is greater. (You'd pay $5 if the balance transfer was smaller than $167.) But the card has no annual fee.

As with many things during the holidays, there can be a naughty and nice list on credit card offers.

Some of those really tempting deals with 0 percent transfers come with steep rates — if you do not pay off that balance after a limited time.

The Citi Diamond Preferred Card, for example, has a regular annual percentage variable rate that could start at 11.99 percent but go as high as 21.99 percent — depending on the customer's creditworthiness.

In general, you'd want to pay off as much of the 0 percent balance as possible before the higher rate hits.

Like any high-calorie treat, the gooey stuff in these credit card deals can drag you down fast if you over-indulge.