Just about everyone knows the pain of paying down credit card debt after the holidays. Even if you set a modest budget and plan carefully for gifts, you always end up with extra expenses, from secret Santa at the office, to contributions to holiday get-togethers, to fluctuating travel costs, and more. Plus, it’s easy to overspend on impulse buys for loved ones, especially if the gifts you carefully planned for are temporarily out of stock during the holiday rush.
What can you do to avoid the New Year’s debt that is common to holiday spending? You might be surprised to learn that you could actually avoid debt and come out ahead with careful planning. With the right rewards credit cards and a sound strategy for spending throughout the year, you might be able to rack up enough points to pay for not only holiday travel, but also gifts, and still come out with additional points to redeem for cash or other awards in the coming year.
How is this possible? Is it a hoax? Here’s what you need to know about creating the most effective pre-holiday credit card strategies so you can enjoy incredible savings year after year.
Picking the Right Rewards Credit Card
Until you really start comparison shopping, you might not realize just how many different rewards credit cards are now on the market. Not only are there the standard VISA, MasterCard, and AMEX options to consider, but there are also a number of banks (Chase, Wells Fargo, B of A, Capital One, etc.) that team up with major creditors to provide specialized rewards cards to members.
In addition, airlines and hotels offer member credit card opportunities, as do a diverse range of businesses, from gas stations and restaurants, to departments stores, to specialty stores like Victoria’s Secret. Each card comes with its own set of terms, rules, rewards, and fees. How can you possibly choose with so many options to consider? Which ones are going to best serve your strategy of saving the most money on holiday expenses?
There are several things to consider. A good place to start is by making a list of the stores and brands you spend the most money with throughout the year. The reason is that rewards cards have lists of qualifying brands and purchases that will earn you the most points. Suppose, for example, you travel frequently for work and you want to earn the most points on airlines, hotels, and other expenses to redeem for your personal travel during the holidays.
You might want to get a travel card that earns points for the airlines or hotels you prefer or that you end up using most frequently. See if any travel cards are affiliated with grocery stores, restaurants, gas stations, or other vendors your frequent locally so you can get additional points that way. Finding cards that are connected to the majority of brands you frequently purchase from is the best way to rack up maximum points throughout the year.
Of course, you can’t forget about terms like annual fees and interest rates, which will certainly impact the card you choose and how much you’re able to save. In addition, you need to get a sense of what your points can be redeemed for if you want to save on holiday expenses, including travel, gifts, and more. It’s definitely a balancing act that requires you to do your homework in order to choose the rewards credit card that will best serve your needs. Don’t forget, you could always get more than one card and spread out spending accordingly to optimize rewards.
Maximizing Bonus Points
Now that you’ve selected the best card or cards for your purchasing preferences, it’s time to start planning to earn maximum points and get the most out of every purchase. This could mean purchasing all of your fuel at qualifying gas stations in order to get, say, 2x points, as opposed to 1x points with another gas station, just for example. If you’re going to make a purchase anyway, make sure you’re getting optimal value from every dollar spent.
You also need to carefully watch your spending so that you don’t find yourself in financial trouble when the holiday season arrives. You don’t want to max out your credit cards just to get enough bonus points to pay for holiday travel or gifts. A sound strategy for savings includes carefully planning credit card purchases so that you only spend on items throughout the year that you would purchase anyway and that you can pay off monthly.
Planning Your Holiday Expenses Early
In addition to planning your normal purchases throughout the year to optimize credit card rewards points, you should think about spreading out your holiday shopping over the course of the year. There’s nothing to say you have to hit the starting line on Black Friday and sprint all the way to Christmas or Hanukkah. As you earn rewards, you can use them to pay for gifts from January all the way through December, decreasing your stress and ensuring that you don’t end up with a massive holiday bill at the end of the year.