After the holidays in 2015, Makenzi Wood’s $14,000 in shared household credit card debt grew by $800. This year, she’s free from that debt — and soon to be $1,000 ahead.
She and her husband collect credit card rewards all year and redeem them for cash back in November to pay for gifts. To determine what they can spend on each person, “we take the total amount of rewards and divide it by the total number of people we’re giving gifts to,” says Wood, owner of the blog Picky Pinchers.
You, too, can offset holiday spending by preparing your credit cards for the season of giving.
Avoid adding to existing debt
In 2017, the average American household carrying credit card debt had a balance of $15,482, according to a NerdWallet study. Without a budgeting plan like Wood’s, holiday shopping can set you back more.
“Write out the full list of what you typically spend money on [during the holidays], and then take a hard look at it,” says Kathleen Cote, certified financial planner and owner of Red Clover Financial Planning.
Also seek ways to tackle existing debt. Wood paid off her credit card debt by significantly reducing expenses, including around the holidays. In 2016, she persuaded her family to do a homemade Christmas gift exchange.
A balance transfer credit card could also help by giving you a break from interest. The ideal one has no annual fee or balance transfer fee.
Rethink the cards in your wallet
Already pay your card off every month? Consider trading up for one that can better reward your good habits.
Rewards credit cards earn cash back, points or airline miles, which can help offset holiday costs. Reward rates and categories differ widely, so choose a card that fits your spending.
Last year, Woods switched her everyday expenses to a rewards card that earned a higher flat rate back on all purchases. “It’s such a drastic increase” in rewards-earning power, she says.
If you’re eyeing a big holiday purchase, seek a card that offers an introductory 0% APR period. If the card also offers a sign-up bonus, you may be able to meet the spending requirement for that bonus via your normal holiday budget. Last year, consumers expected to spend an average of $967.13 over the holidays, according to the National Retail Federation’s annual survey.
When you receive that bonus, use it to offset your holiday spending.
You can squeeze a lot of value from your spending if you’re strategic. Online shopping portals can offer bonus rewards for shopping with specific merchants.
You can also maximize earnings by using different credit cards that earn higher rewards in specific categories.