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Published December 7, 2022

8 Money Strategies for Savvy Holiday Shopping

When shopping for holiday gifts, rely on sales, credit card rewards and alternative payment options for less financial stress in the new year.

The holidays are a magical time of year, but making merry can take its toll on your wallet. More than 4 in 5 Canadians (82%) plan to purchase gifts for friends and loved ones this holiday season, amounting to nationwide spending of approximately $20.5 billion, according to NerdWallet’s 2022 Canadian Holiday Shopping Report.

As much fun as it is to splurge during the holiday season, reckless spending can create financial headaches in the new year. So how do you score gifts for everyone on your list without breaking the bank? These eight money-saving strategies can help you spread holiday cheer without breaking the bank.

1. Create a holiday budget

Budgets come in handy for all money matters, and holiday shopping is no different. The goal of creating a budget isn’t to be cheap, but rather to be mindful of your spending and use your money wisely.

Although it’s ideal to create a budget well in advance of the holiday shopping season, it’s never too late to plan for how much you’ll spend, and on what.

How to create a holiday shopping budget

Use the following steps to assemble a holiday budget:

  1. Look at your debt. Before you allot any money towards holiday spending, assess your debt — especially high-interest debt, like outstanding credit card balances. Having a firm idea of your finances before you start shopping can help you set realistic spending caps.
  2. Figure out how much you can spend. Financial experts recommend you spend no more than 1% to 1.5% of your annual salary on holiday expenses. So, if you make $70,000 annually, you should aim to spend no more than $700 to $1,050 on the holidays.
  3. Put together a gift-giving list. Presents are a meaty holiday spending category, so make a list of the people you plan to purchase for and consider the type of gift you’d like to give. You’ll likely spend a different amount on a secret Santa exchange with coworkers than you might on a partner or family member.
  4. Think ahead to holiday events. Festive parties are common during the holidays, and these events need to be accounted for too. Make sure you include money spent on food, drink, party attire and decor in your holiday budget.
  5. Account for travel expenses. If you plan to visit family, friends, or embark on a well-earned getaway over the holidays, consider travel expenses, like flights, fuel, and accommodations — these also contribute to holiday spending.
  6. Assemble your budget. Establish spending caps for each of your holiday expense categories. Track what you spend to stay accountable and avoid overspending.

2. Start saving (and shopping) early

During the holiday shopping season, it can feel like there’s pressure to spend a lot of money all at once. But, here’s the thing; holidays arrive at the same time every single year. You can take advantage of that knowledge by saving money early and chipping away at your gift-giving list throughout the year.

Save for holiday gifts the same way that you save for your other goals.

  • Create a holiday shopping fund. Use your regular savings account or open a separate account for holiday gifts. Stash your holiday shopping fund in a high-interest savings account to earn a few extra dollars in interest while reducing the urge to spend your savings prematurely.
  • Decide how much you’ll save, and how often. It doesn’t have to be much if you get started early. For example, if you get paid every two weeks and save $50 per paycheque, it will take just 10 paycheques (or five months) to save $500 for your holiday shopping. You can even automate deposits to make saving easier.
  • Shop in the off-season. You don’t have to wait for decorations to go up in order to shop for holiday gifts. Starting your shopping earlier could mean less competition for popular items, better prices, and less spending all at once.

3. Keep your eye out for sales

Keep up with Black Friday sales and other holiday promotions by signing up for email alerts from companies you love. Or, follow your favourite brands on social media, where sales are frequently advertised.

Because many stores carry similar products, it’s also worth your while to compare advertised prices before making a purchase. And keep in mind that some stores might price match — if a competitor offers a better price, the store you’re shopping at may lower theirs to match.

4. Maximize credit card rewards

Nearly 3 in 5 2022 holiday shoppers (59%) will use a credit card to pay for their holiday gifts this year, according to the NerdWallet report. Even if you have money saved for holiday shopping, it may be in your best interest to use a credit card to buy gifts, and then use your savings to pay the bill. Why? Because if you use the right card, your holiday purchases will earn you extra perks, discounts or even cash.

With a cash back credit card, you earn back a small percentage of what you spend. A travel rewards card earns miles that you can use to reduce the costs of a future trip or snag luxury perks, like airport lounge access.

A general rewards credit card earns points that can be redeemed for entertainment, merchandise and gift cards (all of which can be given as holiday gifts themselves, if you already have some points gathered up).

And check to see if your credit card offers price protection. With this feature, you can request an adjustment on purchases charged to your card if the item goes on sale at a lower price, within a specified time frame.

Pro-tip: If you don’t yet have a cash back, travel or general rewards credit card, the holiday season might be a good time to apply for one, especially if it means getting a generous sign-up offer, like extra cash back, thousands of bonus reward points, or an annual fee rebate. Your extra holiday spending may make it easier to meet the minimum requirements to earn the bonus.

» SEE OUR PICKS: Canada’s best credit cards

5. Support small and local businesses

Shopping at local merchants is often beneficial to the community, but it can also benefit the buyer. That’s because some Canadian credit card issuers provide perks to cardholders who patronize small businesses.

One example is Neo Financial, a tech company that offers a Mastercard. Neo cardholders can earn extra cash back when shopping at partner businesses across Canada. Because Neo partners with big and small businesses across the country, the card might allow you to earn cash back and support local businesses at the same time.

Some credit cards have limited-time incentives to help support small, local businesses. For example, during the summers of 2020 and 2021, American Express’ Shop Small campaign allowed cardholders to earn $5 statement credits when they spent $10 or more at a qualifying small, local business.

» MORE: How to choose the best credit card

6. Watch for credit card fees

As the result of a class action settlement, Canadian business owners can now choose to add a surcharge of up to 2.4% each time a customer swipes a Visa or Mastercard. This surcharge, also known as a credit card processing fee, covers the cost of using credit card networks.

Not all businesses charge processing fees. The ones that do must disclose them to customers. The key to avoiding processing fees is knowing where and how to spot them. Look for fee disclosures at storefronts, cash registers and on websites for online stores. You’ll also see the fee on your receipt as a separate line item. If you’re unsure whether a business charges a fee for credit card transactions, ask.

Processing fees are capped at 2.4% and may not seem like much, but these fees can add up, especially if you have big holiday expenses on the horizon. Learn how to spot processing fees before they land on your receipt to trim costs over the holidays.

7. Take advantage of payment options

A growing number of businesses and credit card issuers now offer installment plans or ‘buy now, pay later’ options, both of which let you pay for a large purchase over time rather than as a lump sum. Not many Canadians plan to take advantage of these alternative payment options, though. Just 7% of 2022 holiday shoppers say they’ll use ‘buy now, pay later‘ services, according to the NerdWallet report. Are Canadians missing out on a viable payment alternative? Possibly.

‘Buy now pay later’ financing is available third-party services, like PayBright, AfterPay, Affirm and Sezzle. Oftentimes, there is no minimum spend requirement, so you can get a payment plan for any amount of holiday shopping. However, it’s important to be aware that buy now, pay later plans may incur additional fees, so be sure that you can afford the total cost of the purchase before you commit.

Credit card installment plans are another alternative payment option. But keep in mind that these plans may also come with additional fees, depending on the provider.

8. After the holidays, consider a balance transfer card

If you find yourself struggling to pay off high-interest credit card debt come January, a balance transfer credit card may help.

These credit cards have promotional periods with low interest rates for a designated period of time. Transferring your debt to one of these cards lets you pay down your debt without incurring a lot of interest. But be aware that once the promotional period is over, the interest rate will increase to the card’s regular rate.

Frequently asked questions about holiday shopping

Is it cheaper to shop before or after Christmas?

Thanks to post-holiday sales, you’ll often find more deals and discounts on merchandise after Christmas. 

How much does the average person spend on holiday shopping?

2022 holiday shoppers plan to spend $675 on average this holiday season on gifts, according to NerdWallet’s 2022 Canadian Holiday Shopping Report.

About the Authors

Shannon Terrell

Shannon Terrell is a lead writer and spokesperson for NerdWallet, where she writes about a variety of personal finance topics. Previously, she was a writer, editor and video host for financial comparison company, Finder. Shannon has appeared as a financial expert on CP24 and has been quoted in numerous publications, including Yahoo! Finance and Black Enterprise. She holds a bachelor’s degree in communications and English literature from the University of Toronto Mississauga. She’s also a published author whose work has been featured in academic journals from the University of Toronto. Shannon is based in Brampton, Ontario.

Hannah Logan

Hannah Logan is a writer and blogger who specializes in personal finance and travel. You can follow her personal travel blog or find her on Instagram @hannahlogan21.

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