7 Tips for Maximizing Rewards and Avoiding Debt During the Holidays
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Written by
Joseph Hostetler
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Edited by
Jasmin Baron
Whether it’s doorbuster shopping during Black Friday and Cyber Monday, buying airfare during peak travel season to visit the family, or overindulging at restaurants with friends, you’ll often find two things to be true:
- It’s easy to rack up credit card rewards
- It’s also easy to rack up debt
Before the season gets too crazy, you need a game plan. Maximizing credit card rewards at the end of the year while avoiding holiday spending debt is totally possible. Here are seven tips to help you amass credit card rewards with the best credit cards for holiday shopping while saving serious money.
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1. Don’t Overspend
Above and beyond any other tips for avoiding debt and maximizing rewards is to keep from spending money you don’t have. Chasing rewards can be tempting, but carrying a balance month-to-month will incur credit card interest that more than negates the points you’ll earn.
The key is to treat your credit card like a debit card. If the money’s not in the bank, don’t spend it. You should be able to pay off your credit card in full each month.
2. Redeem Statement Credits and Targeted Card Offers
Most major credit card issuers provide digital coupons (often referred to as “offers”), which you can find by logging into your online account.
These offers reward you in the form of a statement credit or bonus points/cash back when making eligible transactions. Just add them to your card with a click, and the offer will automatically reward you when you fulfill its terms. For example, one of my rewards credit cards currently offers a $100 credit after spending $500 at Dell.
Look for offers that will save you money on purchases you planned to make anyway.
3. Use Welcome Offers To Lower Your Bill
One of the best ways to ease the blow of an expensive shopping season is by redeeming a credit card welcome bonus (or two) to lower your out-of-pocket expenses. Several credit cards come with generous intro offers at the moment.
For example, the Bank of America® Premium Rewards® credit card currently offers a 60,000 points bonus after spending $4,000 on purchases within the first 90 days from account opening. That’s worth a whopping $600 in cash.
4. Don’t Pay With Points at Checkout
One of the worst ways to redeem your rewards is via the Shop With Points feature commonly found at checkout with merchants like Amazon, Walmart, CVS, and even gas stations like BP and Shell. You’ll generally receive a value no greater than 0.8 cents per point when doing this.
There are two reasons to avoid this and instead simply redeem your points as a statement credit:
- Many credit card rewards can be cashed out at a superior value of 1 cent per point. You’ll (usually) spend fewer points by redeeming them as a statement credit to erase your balance.
- When you pay with points at checkout, your credit card won’t be charged the full amount for your spending. By redeeming points as a statement credit after your purchase, you’ll earn rewards for the full amount of your shopping.
5. Keep an Eye Out for Amazon Shop With Points Promotions
Having tarred and feathered the concept of Shop With Points, there actually is one scenario in which paying with points can be a good idea.
Amazon occasionally publishes promotions that offer discounts when splitting your payment between cash and points. To qualify for the discount, you typically only need to use 1 point. Previous discounts have been up to 50% off your Amazon order just for using a single point.
Promotions like this are a no-brainer way to save money on your holiday shopping.
6. Use a 0% Intro APR Credit Card
Again, it’s a bad idea to buy items for which you don’t currently have the money with a credit card. Rewards credit cards, in particular, come with nightmarish APRs, which can make it very difficult to dig yourself out of debt.
That said, if an item that you need anyway is discounted (say, for Black Friday or Cyber Monday), you may save money in the long run by financing it with a low APR credit card. Several of the best 0% APR credit cards offer an interest-free window of a year or more, giving you the ability to pay off the purchase without racking up interest payments.
For example, the Wells Fargo Reflect® Card comes with 0% intro APR for 21 months from account opening on purchases and on qualifying balance transfers, then a 17.74%, 24.24%, or 28.49% Variable APR.
7. Collect the Right Credit Card Rewards
Not all credit card rewards are created equal. Be strategic about which rewards currency you earn.
For example, if you plan to redeem your points as a rebate for your purchases, your best bet is to swipe cash-back credit cards. Travel credit cards like the American Express® Gold Card, an advertising partner, may look enticing with its excellent bonus categories and upscale benefits. But you can only redeem the American Express Membership Rewards® points it earns for cash back at a meager rate of 0.6 cents each.
But if you intend to redeem your rewards for travel, the Amex Gold is a great option. You can typically receive a value of more than 1.5 cents per point when transferring points to an Amex travel partner like Delta SkyMiles or Air Canada Aeroplan.
All to say, collect the rewards that align with your financial goals.
Frequently Asked Questions About Maximizing Credit Card Rewards During Holiday Shopping
Is it worth opening a new credit card for holiday spending?
It can be worth opening a new credit card for holiday spending if you are confident you won’t be tempted to overspend. By opening a new credit card, you can earn lucrative welcome bonuses, utilize additional bonus spending categories, and benefit from perks like purchase protection and introductory APR offers.
Does opening a new credit card hurt my credit score?
Yes, opening a new credit card can hurt your credit score — but only temporarily. When you apply for a new loan, you’ll typically receive a hard credit inquiry on your credit report, which drops your score by a few points. But with responsible credit habits, your score will rebound quickly.
Are Buy Now Pay Later plans better than credit cards for holiday purchases?
Buy Now Pay Later (BNPL) plans are not necessarily better than credit cards for holiday purchases — but they do have a place. These services generally give you the option to pay in short, interest-free installments. If you’re certain you can make each payment, a BNPL loan may not be a bad idea, but you’ll forgo benefits like purchase protection and extended warranty if you go this route.
