How credit card rewards can help pay for the holidays
The holidays are the best of times and the worst of times. They鈥檙e a great excuse to catch up with family and friends, take a break from work and remember what鈥檚 truly important. They鈥檙e not so great for either your wallet or your waistline.
Using the right credit cards strategically or signing up for a new one won鈥檛 do much for your waistline 鈥� but both can help you recoup some of your holiday spending. Here鈥檚 what you should keep in mind.
Holiday spending brings bonuses within reach
惭补苍测听, but there鈥檚 a catch: Claiming that bonus typically requires charging a certain amount during a certain time period. It might be more than you鈥檇 be comfortable spending under normal circumstances.
But if you鈥檙e like many Americans, the holidays aren鈥檛 normal circumstances. You鈥檙e likely to spend more than usual, whether it鈥檚 on plane tickets, gifts or free-range organic turkey. And you might as well use the opportunity to meet the requirements for a fat sign-up bonus. Some are worth hundreds of dollars.
Proceed with caution, though. It鈥檚 not wise to sign up for a credit card solely for the bonus. Applying can ding your credit score temporarily, and issuers frown on people who open new cards too frequently. Look for a card that pairs a sign-up bonus with ongoing rewards that will keep paying you back long after the holidays have passed.
It鈥檚 time to maximize travel rewards
Many travel credit cards grant higher rewards rates for travel-related purchases. Some provide a boost only for flights or hotel stays booked through their websites, but others reward an array of purchases, such as Airbnb stays, Amtrak tickets and Uber rides.
If you鈥檙e traveling this season, consider dusting off an old travel credit card account or applying for a new one. You鈥檒l earn points or miles, and your card might offer other travel perks. Weather delays loom over holiday travel, so a card with travel insurance, delayed baggage coverage or access to airport lounges can be especially helpful. Co-branded airline cards typically give you free checked bags.
The holidays are a prime time to earn a sign-up bonus on a new card, but it鈥檚 probably too late to use that bonus to pay for this year鈥檚 holiday travel. A 2016聽聽found that it鈥檚 best to apply for a travel card at least five months before your big trip. That gives you a chance to receive the card, earn the bonus, have it credited to your account and book travel early enough to get a good rate. Still, a sign-up bonus you earn now can save you money on spring break, summer vacation 鈥� or next year鈥檚 holiday travel.
Smart shoppers spend strategically
Travel may be the biggest holiday expense that comes to mind. But even if you鈥檙e celebrating at home or driving to Grandma鈥檚, the costs can add up.
If you鈥檙e hosting a holiday meal: Unless you鈥檙e holding a potluck, you鈥檒l probably spend a lot on groceries between mid-November and New Year鈥檚 Day. A credit card that pays a higher rewards rate on grocery store purchases will help. Better yet, because groceries are a year-round expense, the card will provide rewards after the tinsel is cleaned up.
If you鈥檙e buying a lot of gifts: Some credit cards with rotating bonus categories offer higher rewards rates at department stores, Amazon or other large retailers during the fourth quarter. Look for one that rewards purchases from the places you鈥檙e likely to spend the most on gifts. Alternatively, if you tend to buy from just one store, find out if it offers a聽聽with extra discounts. If you do that, though, plan on paying your balance in full every month. Store cards charge notoriously terrible interest rates.
Spend a comfortable amount: As much as you want to see their little faces light up, don鈥檛 run the risk that your kids will outgrow their holiday gifts before you鈥檝e paid them off. Set a budget so you won鈥檛 be stressed when the bills arrive. Credit card rewards can ease the pressure on your bank account during the holidays, but they can鈥檛 replace a wise spending plan.
Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email:聽virginia@nerdwallet.com. Twitter:.
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