It’s the holiday season! A time when you’re likely to ramp up spending preparing for family get-togethers, gift giving to friends, family, and work colleagues, and buying festive food and decorations. Squeezing as much as you can out of your spending can help you avoid a big blow to your pocketbook.
What are your holiday plans?
There are two basic types of spending you’ll likely be doing for the holidays: retail purchases and travel.
- Retail purchases. This can include things like gifts, food, and decorations. Basically any items you’d buy at the store or online to get ready for the holidays fall into this category.
- Travel. Travel can get costly, especially if your friends and family aren’t within driving distance. Don’t make the mistake of only adding up the cost of airfare. Consider what you’ll also be spending for hotels and car rentals—and the fact that many of these services will be in demand and more costly during the holiday season.
Long holiday shopping list? Consider a cash-back card
Cash-back credit cards are some of the easiest to use, offering a certain percentage of your purchases paid back to your credit card balance. Often, cash-back rewards are dependent on what you’re purchasing. You may receive a different percentage back on, for example, purchasing gas versus purchasing electronics. Many cash-back rewards cards will offer a larger percentage back for making purchases at a particular retail outlet, like Amazon.com or REI.
Don’t forget to pay off your credit card balance completely if you want to reap these cash-back rewards. Otherwise, any cash-back rewards you might have earned will be easily wiped out by interest charges.
Extensive travel plans? Pick a card with robust travel rewards
Travel during the holidays can get costly, so squeezing all you can from your travel costs is important. Credit cards that offer travel rewards will often give you reward points or air miles for future discounts on airfare, hotels, car rentals, and entertainment. Frequent travelers make heavy use of these kinds of credit cards, even outside of the holidays.
Keep an eye out for additional perks and benefits
Many credit cards have a variety of perks available that can offer great incentives—if you remember to take advantage of them. Look for things like travel insurance, waived baggage fees, no foreign transaction fees, extended warranties, purchase protection, price protection, and more.
Review any restrictions
Often reward credit cards will have limits on how many points, miles, or cash-back rewards you can earn. These limits can be on an annual or quarterly basis, so be sure to double-check. If your spending habits are roughly the same month to month, a card with a quarterly limit might be ideal. If you ramp up spending during specific months, it might be better to go with a card that has an annual limit.
Check the interest rate and annual fee
Some credit cards can offer high reward returns because they charge a high-interest rate or an annual fee. Double-check your rate or fee costs before choosing a card, and make sure the reward incentives outweigh the possible costs.
Pro tip: Look for a card with a sign-on bonus
Many credit card companies will offer a large bonus for choosing their card. This bonus can be in the form of air miles, reward points, or credit. Keep in mind that the bonus is usually contingent on you making a certain dollar amount in purchases within a certain time frame. Don’t be swayed by a bonus that you won't be able to take advantage of—or one that causes you to spend recklessly just to meet the requirements.
You might just want a low-interest rate instead of rewards
Picking the right credit card can greatly incentivize the holiday shopping or travel you were going to do anyway. But, as with any credit card spending, it’s important to stay on top of the details, spend within your means, and avoid taking on too much debt. If you know you’re likely to carry a large credit card balance into the next year, it might be smarter to choose a credit card with a lower interest rate. Having limited debt can be one of the best rewards there is!