On a similar note...
On a similar note...
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As we get closer to the end of the year, October can serve as a checkpoint as you take inventory of your credit cards and overall financial picture.
Even amid the COVID-19 pandemic, holiday shopping will still take place, although perhaps largely online. So an obvious tip is to use the cards that reward you the most for spending you're already planning.
But you'll also want to make sure that a shopping spree is even a good idea. Tallying up balances ahead of holiday expenses can allow you to spend with an accurate understanding of your finances. If your budget is tight, you can avoid those impulse Halloween buys and opt to get creative at home instead.
Here are some savvy credit card moves to help you prep your finances for the holiday months ahead.
Assess any current credit card debt
The economic downturn may have led you to rely on credit cards to cover necessary expenses, and in times of crisis, that's what your credit is for.
But you'll want to evaluate whether this approach is sustainable. Some questions to ask yourself include:
Is my income no longer enough to pay off my debt?
Am I struggling to pay off debt due to high interest rates?
Am I struggling to make the minimum payment on my credit cards?
If you’ve answered yes to any of these questions, it may be time to consider get-out-of-debt options. Sooner is better so that you can head into the holidays with a debt-crushing mindset.
Among debt-tackling options, credit card relief programs may offer deferred payments or a break on interest payments for a few months if you’ve been impacted by COVID-19 physically or financially. This option is ideal for short-term debt.
For long-term debt that can take up to five years to pay off, a debt management plan can consolidate different balances into one payment with a fixed interest rate.
Consider your new normal for household spending
If your finances are in good shape and you aren't weighed down by debt, then consider whether your current credit cards are still giving you the most value amid pandemic-related shifts in household spending.
Perhaps you've traded "dining out" for more frequent trips to the grocery store, or maybe you're no longer using perks on an expensive travel card. If so, it may be a good time for a new addition to your wallet, and this bonus-friendly season offers an advantage.
By getting a credit card in October, you can work toward earning its sign-up bonus. Typically credit cards offer a three-month window for you to meet the required spending amount for the bonus. Depending on how much you’re likely to spend around the holidays (on top of your everyday purchases), you might easily meet that requirement, snagging you potentially hundreds of dollars in cash back or points that you can use to defray purchases or put toward travel or gifts.
Nerd tip: If paying an annual fee is no longer sustainable, it may be possible to downgrade your credit card and save on that cost. Downgrading a credit card rather than closing it outright can also be beneficial for your credit scores — but since you're not opening a "new" account, you likely won't qualify for a sign-up bonus this way.
Plenty of credit card options exist, especially if you have good credit and solid financial footing. Here are some to consider:
Cash-back credit cards
A cash-back credit card offers the most flexible reward of all: cash. You can typically redeem rewards for a statement credit or a deposit into your bank account.
The Citi® Double Cash Card – 18 month BT offer, for example, offers a decent rate on all purchases, so you’ll get value no matter how your household budget may have changed. It earns 2% cash back on every purchase: 1% when you buy and 1% when you pay it back. It has a $0 annual fee.
If you're willing to put in some work, the $0-annual-fee Chase Freedom Flex℠ could be even more lucrative. It earns 5% cash back in rotating bonus categories on up to $1,500 in combined purchases each quarter (activation is required). For Q4 2020, those categories are Walmart and PayPal, both of which can come in handy for holiday shopping.
It has a rich introductory offer as well: Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening. New cardholders also get 5% back on grocery store purchases on up to $12,000 spent in the first year.
Beyond that, the card earns rich fixed rewards in popular everyday categories: 5% back on travel purchased through Chase; 3% back on dining at restaurants and on drugstore purchases; and 1% back on all other purchases. That all adds up to a lot to remember ... but also potentially a lot of cash back.
The Flex and other cash-back cards even offer a 0% introductory APR for new cardholders that you could potentially use to finance a large holiday purchase.
Travel credit cards
Travel credit cards may be hit-or-miss for you these days, given some restrictions on international travel. But if you intend to bank points or miles for a vacation sometime in the future — or even if you do a lot of relatively local travel — a travel card may be worth considering.
The Capital One® Venture® Rewards Credit Card, for instance, offers 2 miles per dollar spent on all purchases. It also packs a potentially large sign-up bonus: Earn 100,000 bonus miles when you spend $20,000 on purchases in the first 12 months from account opening, or earn 50,000 miles if you spend $3,000 on purchases in the first 3 months. The card has a $95 annual fee.
Do your best to manage new credit cards responsibly
Depending on your situation during this pandemic, practicing healthy credit card habits could present a challenge. Still, here are guidelines that can help you minimize the impact to your finances: