This maybe what Jennifer said, but just in case it's not, here is how I resize items with a different aspect ratios.
1. open your psd/tiff in Photoshop
2. resize your entire page to 5.125 x 5.125 (the elements will only ever be as large as the smallest side)
3. change your canvas size to 5.125 x 7.35 (make sure you do not have a "background layer")
4. resize your background paper (red stripe) maintaining the aspect ratio so that it completely covers your entire canvas (even though enlarging isn't always yield the best quality, the percent of enlargement on this is minimal, so it shouldn't be a big deal ... if it is, just open up the paper from the kit and downsize it)
5. resize your white background paper -- since there isn't a pattern, maintaining the aspect ratio probably won't affect the look of your card. Most places have a bleed space, so you may want to make this a little smaller so more of the red stripe is visible
Good luck!