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After two years of COVID-interrupted celebrations with loved ones, many will find it more important than ever to celebrate the holidays well. At the same time, record inflation and growing job insecurity in certain sectors can make finances tight.
Shoppers across the board are increasingly worried about holiday finances. In a September 2022 National Retail Federation survey, 43% of consumers said they don’t earn enough to cover the costs of gifts and other holiday purchases.
To help offset costs in what could be an expensive month, use these five strategic spending tips to make the most of your credit cards this holiday season.
Save on holiday groceries
Whether you’re feeding a crowd for this year’s holiday gatherings or simply hosting a few overnight guests, rising costs at the grocery store can add up quickly around the holidays to blow through your usual budget. To minimize costs, make a plan for your holiday grocery spending, and don’t be afraid to distribute costs by asking your cousin to bring their signature casserole.
For holiday meal savings that will carry into the new year, check out Chase's latest grocery offer. For a limited time, new cardholders of the Chase Freedom Unlimited® and the Chase Freedom Flex℠ who apply directly through Chase can earn 5% cash back at grocery stores (excluding Target and Walmart) on up to $12,000 in spending in the first year. That's in addition to an impressive sign-up bonus of $200 cash back after you spend $500 on purchases during the first 3 months from account opening. (Note that these offers are available only to those who apply directly through Chase. NerdWallet features a different offer.)
To maximize your return on spending over the holidays, stack your credit card rewards with additional savings by shopping for groceries and gifts through a cash-back shopping website or app like Ibotta or Rakuten.
Check your bonus categories
This quarter, the Discover it® Cash Back offers 5% back on Amazon.com and on any payments made through a digital wallet such as Apple Pay or Google Pay.
The Chase Freedom Flex℠ also features holiday friendly cash back categories this quarter, offering 5% back at Walmart, both in-store and online, and on any purchases made through PayPal.
Keep in mind, though, that both cards cap those 5% bonus rewards at $1,500 spent per quarter — after that, they earn 1% back on all purchases. If you made significant purchases in October and November, you may be close to that limit, so check your online accounts and consider how you might shuffle the cards in your wallet to maximize value.
Or, choose a card that adapts to your spending. The Citi Custom Cash℠ Card offers 5% cash back up to $500 per billing cycle in your top spending category of 10 options, including grocery stores, restaurants and select travel.
Take advantage of lucrative sign-up bonuses
Earning 5% back on holiday purchases is certainly better than nothing, but savvy cardholders know that the best value in credit card rewards comes from lucrative welcome offers. And if you’re already going to be spending significantly on holiday travel, gifts, and meals this month, why not plan ahead to make that money work for you?
If you plan to travel a lot in the new year, the Citi Premier® Card currently features a bonus offer tailor-made for your wanderlust. Earn 80,000 bonus ThankYou® Points after you spend $4,000 in purchases within the first 3 months of account opening.
Prefer cash back to offset the cost of your holiday spending? The Capital One Savor Cash Rewards Credit Card currently features this bonus: Earn a one-time $300 cash bonus once you spend $3,000 on purchases within 3 months from account opening.
Redeem rewards to pay for gifts
Speaking of sign-up bonuses, remember the one you signed up for last holiday season? Did you redeem all those rewards? If not, consider how they might help you out with this year’s holiday spending.
If you’ve been stockpiling rewards on a cash back credit card such as the Citi® Double Cash Card or the Wells Fargo Active Cash® Card, you can safely convert those points to cash or statement credits to help offset the cost of holiday purchases.
Some credit card rewards programs will allow you to redeem points for cash, statement credits, gift cards or with specific retailers directly. But be aware that many of these options will make your rewards less valuable. For example, you can typically redeem Chase Ultimate Rewards® points for cash at a value of 1 cent per point, but if you use them to pay for your Amazon purchase directly, they'll be worth just 0.8 cent each.
Do you have leftover rewards on a travel credit card? Redeeming those for cash or statement credits may not be your best plan, as it may reduce the value of your points.
Plan strategically for your debt
Even with all the best budgeting tips in hand, the reality is that many people will go into debt over the holiday season. In fact, Americans’ credit card balances increased 15% in Q3 of 2022 compared with the same period a year earlier, according to the Federal Reserve Bank of New York. That’s the largest increase in over 20 years.
But just because you may find yourself going into debt over the holidays doesn’t mean you can’t be strategic about it. Here are three ways you can prioritize healthy finances this holiday season, even if that includes taking on additional debt:
Protect your credit score by prioritizing on-time payments on any existing debt accounts.
Avoid hasty credit decisions in the frenzy of holiday shopping. Don’t be swayed in the checkout line by a store credit card offer with vague rewards or confusing deferred interest terms.
Consider a 0% interest offer for your holiday spending to avoid racking up debt on a card with high interest.
Not sure yet whether you’ll break even this holiday or need additional time to pay off debt? Carve out time in January to evaluate your post-holiday finances. If you do find yourself with high interest debt that you need to pay over time, you can make a plan to transfer that balance onto a lower interest card.