The holidays are underway and retailers are seeing an expected increase in transactions. With thousands of consumers opting to pay with plastic, the increase also can be seen in the number of transactions processed by credit card companies. Last year, 49 percent of all holiday purchases were credit or debit card transactions; the number is expected increase this year following a trend for the past several years.

Consumers often get caught up in the holiday spending frenzy and end up overspending their budgets. As a result, billions of dollars in fees and interest charges are at stake. In addition to interest rates, late fees, annual fees and other charges to cardholders, the banks charge fees of one percent to three percent to merchants for processing all of the transactions. Last year, interchange fees alone totaled over $25 billion.

In advance of the holiday season, many credit card companies offer incentives to encourage consumers to use credit and debit card for purchases. For example, Visa is running a contest offering $1.5 million to 50,000 consumers that spend with Visa during this holiday season. MasterCard has a holiday home giveaway where consumers are automatically entered if they use their MasterCard between November 1 and December 31.

Banks are getting in on the promotions as well. Recently, American Express and Bank of America began offering cards that put money into a savings account after every purchase. While these cards can be enticing they do have drawbacks. For example, American Express' One card puts one percent of all purchases into a savings account for the consumer for a $35 annual fee. However, the card is only valuable if more than $3,500 is being charged per year and the cardholder does not carry a balance.

Debit cards, while they are easy to use for customers, carry some added risk because laws regarding debit transactions are not as strict as those governing credit card transactions. In fact, electronic transfer rules (which govern debit cards) put more of the burden of reporting possible fraud on the consumer, compared to the truth-in-lending rules governing credit cards. In addition, the new speed-pass technology on debit cards also leaves consumers exposed to a greater risk. This technology is designed to speed up the time a transaction takes, but because it doesn't require a PIN or signature there is a higher risk of fraud if a card is stolen.

It is certain that, as this holiday season continues, consumers will be using plastic in increasingly large numbers. It is important, however, that they be aware of all of the aspects of increasing card usage - good and bad. As is true with many things, consumer advocates point out that the devil is in the details.