Next to wrapping paper and ribbon, one of the most important holiday gift-giving tools is a credit card. If you paid cash for gifts during the holiday season, you may now be learning that credit cards would've been a smarter choice. They allow you to make and track purchases with ease-essential requirements if you want to prevent the holiday cheer from turning sour.

Much of the joy of the holiday season is derived from giving gifts. No matter how well-intentioned your stint as Santa may be, however, there are instances where your gift just doesn't hit the mark. If a sweater isn't the right size, or an electronic device doesn't work quite as expected, the recipient of your gift may need to return it. Purchasing a gift with a credit card can make the return process-and other personal finance tasks-much easier.

Diminishing returns

Returning a present seems like a relatively straight-forward transaction. You bring the gift back to the store, and receive cash or credit in exchange for the item. Unfortunately, many of today's retailers have scrapped this simple system. Too many savvy accountants believed that the good will and convenience that this policy generated was not worth the negative impact on a retailer's bottom-line profits.

As a result, exchanges today have become more complicated. Many retailers will refund the current price for a returned item--not the original purchase price-if you can't produce a receipt. If the gift is on the clearance rack when it's returned, for example, most stores will only give you the discounted price. This can significantly affect the amount of your refund.

Use a credit card for better tracking

Knowing that you may lose money if a gift is exchanged, it makes sense to do your gift shopping with a credit card for a number of reasons.

1. Tracking purchases: It's customary to attach a gift receipt in this day and age, but in the holiday frenzy, these can often be misplaced or forgotten. If you made a purchase with a credit card, however, the store can quickly review the purchase on their database and credit the return accurately. You can also easily review your statement to see how much you spent, and where you spent it.
2. Acquiring reward points: Even though you may lose some money in the event that a gift is returned, you can still garner some purchase points if you have a rewards card. Considering the number of big purchases made over the holiday season, using a rewards credit card is an easy way to give yourself a nice little gift, too.

Credit cards can be as critical to a holiday shopper as elves are to that bearded guy at the North Pole. They'll make your purchasing convenient, easy to track, and provide an easy means to prove a purchase. Granted, no one likes paying the bill that comes with those little pieces of plastic; but if you used cash this season, the proper use of a credit card can make your future holidays a little happier.