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Overcome Bad Credit When Shopping for the Holidays

When you're dealing with bad credit or trying to rebuild your credit after a bankruptcy, home foreclosure, or other financial hard times, the holiday shopping season can be a less-than-joyful time of year. It can be hard to not have access to credit during the time of year when Americans are shopping more than ever.

How can people enjoy buying holiday gifts and soaking up the spirit of the season when "charge it" is not an option?

Fortunately, there are a variety of ways that people with bad credit can still fully enjoy the holiday shopping season. For example:

Save Cash in Advance

If you have bad credit, going into further debt to buy holiday gifts is not a great option. So instead of putting holiday purchases on your credit cards, use gift cards or pay cash. Whether it's using a simple cash savings jar, or a dedicated savings account from your bank or from an online service like SmartyPig, there are many ways to save up for a specific financial goal.

Use Layaway

Many retailers are bringing back store layaway programs that let you pay in advance over time, without having to go into debt. Some of the stores that offer layaway programs (during the holidays and sometimes all year round) include Sears, Walmart and Kmart. When you use layaway, you can buy what you want without having to use a credit card – you just make a down payment (sometimes as little as $10, depending on the price of the item that you want) and then pay for the rest of the item's price in time for the holidays.

Get a Bad Credit Credit Card

If you have bad credit and have been declined for credit, you might want to get a "bad credit credit card" (also known as a secured credit card) that enables you to borrow a small, fixed amount of money and repay it each month. The holiday shopping season doesn't have to be all about shopping – it can also give you an opportunity to help rebuild your credit score by using a bad credit credit card to pay for purchases.

The holiday season can be fun, exhausting, stressful and emotionally complicated all at the same time, and these emotions are intensified when you're dealing with bad credit. Look for ways to save up and pay cash, use programs like store layaway, or rely on a secured credit card or "bad credit credit card" to make your holiday shopping happier.

Top 5 Credit Cards For Holiday Shopping

bills know no seasonThe holidays only come but once a year, but the bills they can incur — well, any shopper can tell you that statements in the mail know no season.

If you intend to spend on your friends' and family's happiness this season, you might as well do it in a way that makes you happy, too. And that keeps your wallet in good shape while you're at it.

Experts on credit cards and holiday shopping have some ideas about how to make that happen. Let’s look at the best options when it comes to credit cards that make it easier to say "Yes," and less likely to say "Oh no" when the bills arrive.

5 Cards for the Holidays

When we talk about credit cards for holiday shopping, we’re looking at three key criteria: bonuses for signing up, cash back and rewards, and low interest rates. You want to get the most back for what you spend.

Our experts include Bryan Marsden, personal-finance writer at FatWallet, and Matthew Goldman, founder and CEO of Wallaby Financial. Here’s what they recommend — both tapped the first three, and then we supply one additional pick from each.

5-great-cardsCiti Dividend Platinum: This card offers a $100 bonus when you spend $500 in three months (for new members). You get 1% cash back on all purchases, with an additional 4% on a rotating list of product categories. For this holiday season, that bonus 4% applies to Best Buy, department stores, and toy stores. It also features 0% interest for 12 months for new sign ups.

Chase Freedom: This card also offers a $100 bonus for $500 spent in three months for new members. Add to that unlimited 1% cash back on all purchases, and an additional 4% on rotating categories (limited to $1500 spent for the quarter). For the holidays, that bonus applies to Amazon and select department stores. It sets 0% interest for 15 months for new sign ups.

Discover IT: This card doesn't have any fancy sign up bonuses, but it does offer 5% rewards on all online shopping, and 1% for all other purchases, which makes it a solid card for holiday shopping if you plan on doing a lot of it from your screen(s). It also starts at 0% interest for 12 months for new cardholders.

Chase Sapphire Preferred: Marsden suggests this one for the sign-up bonus. New cardholders get a 40,000-point bonus for spending $3,000 in three months. It gives two points for every dollar spent on travel and restaurants, and then one point per dollar spent on everything else. Perks include 20% off hotels, airfare, car rentals, and cruises, if you book through the Chase Sapphire portal. Note the $95 annual fee after the first year.

Barclaycard Arrival World MasterCard: Goldman suggests this one as a way to rack up points for future travel (after knocking off your holiday buying). Two miles per dollar on all purchases, and then a 10% bonus when you use those points for travel. That’s like 2.2% cash back, he says. Travel insurance comes with, and you get a free subscription to TripIt Pro (a mobile travel assistant app), Note the second-year annual fee: $89.With these kinds of perks and benefits, you should be able to go down your list and feel a lot better about the end results.

Whatever you do, make certain that you have a plan in place to make those monthly payments on time, so that the boost you feel from these cards aren’t overshadowed by buyer’s regret come April.

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