Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
As the holiday season approaches, the excitement of gift-giving is often accompanied by the dread of overspending. But what if I told you that with a few clever credit card hacks, you could navigate through this festive period without the financial hangover?
Much like finding those hidden gems during Black Friday sales, your credit card, when used wisely, can be a tool for substantial savings and even earning while you spend. From snagging the best deals to maximizing rewards, let's dive into how you can make the most of your holiday shopping without breaking the bank.
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Budget Your Money and Prioritize Spending
Budgeting allows you to carefully choose the right number of gifts and to control your spending. This year might be a great year to contact the adults on your list and agree to stop buying each other gifts.
Next, shop sales. Black Friday shopping may not be your idea of a good time or it might be your favorite event of the year. It is also possible to find these deals online without braving the crowds.
The Credit Card Savings Plan
Now that you have a reasonable gift list and a written budget, it is time to look for the right credit card that will help save or even earn you money. If your
credit score is in good enough shape, start looking for a card that offers incentives.
Sign Up Bonuses
Look for a credit card that offers signup bonuses with a minimum amount that must be accrued within the first three months of opening it. You’ll be able to recoup all or part of what you spent on holiday gifts with the opening bonus. Stick to your budget and your shopping list when using the card.
0% APR on Purchases
Similar to sign up bonuses, some cards may offer a
0% APR on purchases made during an initial time frame. This is a nice cushion to have if you may spend a bit more than you meant to and can’t pay it off during the first month.
Store Credit Cards
Branded cards like a Walmart or Target card can also be an option to save money. If you tend to do all your shopping at a specific store, you can earn points towards discounts and even cash back.
Be aware that branded cards tend to have higher APRs than non-branded cards and are not necessarily a good deal for an everyday credit card.
Cash Back Cards
Using a cash-back credit card means that you get a small percentage of each purchase back. You can get it as a check or use it to
pay down your credit card bill. Some cards will offer cash back on all or most purchases while others have a scale percentage so you may get more back at certain store categories (grocery, gas, etc). Other cards have a rolling discount that applies to different categories at different times.
Look for a 5% back card for the best results. Some cards offer cash back at specific stores such as Amazon or big box stores. Like store cards, these can earn extra money from purchases made at those stores. Just make certain you know what cash-back incentives your card offers!
Reward Cards
If your credit card offers rewards, you may be able to earn points toward future purchases or even travel. Some cards offer gift cards in return for purchases – you might be able to gift these or use them at a future date. Many of the big cards (Visa, Mastercard, etc) may allow you to link rewards with future purchases of Amazon.
Other cards help you accrue airline miles or hotel stays. Depending on your card, it may be a better deal to take the rewards instead of the cash back, so make certain you read the fine print.
Price Protection
These cards are not as common as they used to be. These cards will ensure that expensive items that have a price drop after the holidays will reflect the price drop on your credit card bill. They generally offer a limited time frame for the price guarantee.
Purchase Protection and Warranty Protection
Purchase protection means that you may be reimbursed if a purchase is damaged or stolen within a specific time frame. This can be especially important if you do a lot of online shopping because you are protected against damage during transit or as the item is sitting on your front door step.
If you are buying electronics, some cards come with a warranty on purchased items and this can make your purchases more secure. Read the fine print to know what you are getting.
Fraud Protection
Using credit cards means that you are opening yourself up to hacking, especially during the holiday shopping season. And you do not need to be shopping online for your card to get hacked – it’s just easier for the hackers!
Always check your statements to look for any fraudulent purchases and respond to notifications that you have some off usage on your card.
Stack Cash Back Cards at Cash Back Shopping Sites
If you use a cash-back app for a favorite store or like cash-back online sites, use your cash back card for that extra cash boost. Instead of keeping the cash, consider using it to pay down your credit card bill.
Pay Off Your Credit Card
Once you have made your budgeted purchases, it is time to take care of yourself! Use the cash-back rewards to pay off part of your card. Redeem rewards that are in gift cards or travel/hotel rewards. Pay off your entire purchase with your budgeted money before the billing cycle rolls around.
Your next step is to carefully examine your annual, monthly, and weekly budget and see where you can cut costs and use any extra cash to pay down outstanding bills.
Budget Your Money and Prioritize Spending
Setting a realistic holiday budget is key to minimizing financial damage this season.
Here are some tips:
- Use a budgeting app like Mint or YNAB to track all gifts, food, decorations, and other seasonal expenses
- Set a firm gift spending cap for each person on your list, such as $50 per adult relative
- Search online for DIY or homemade gift ideas to give for less
- Host potluck-style gatherings rather than lavish expensive meals
- Suggest charitable donations or Secret Santa as an alternative to exchanging gifts
Sticking to your predetermined budget limits will help make sure you start the new year off on the right financial foot.
The Credit Card Savings Plan
Maximize Cash Back Cards
For savvy spenders, cash-back credit cards can help maximize holiday savings. Check your card benefits for special bonuses or increased earning rates during the holiday season. For example, the Example Card offers 6% cash back on all online and retail purchases made in November and December.
The increased earning potential on top of normal perks makes it a go-to card for holiday shopping. You can also boost savings by shopping through cashback websites and portals that offer bonus percentages when you click through to retailer sites.
The Downsides of Store Cards
While branded store credit cards may advertise tantalizing first-purchase discounts, it is important to read the fine print before applying. Store cards tend to charge significantly higher interest rates than general rewards cards - often 24% or higher. They also tend to have lower credit limits.
Avoid opening a card just to save 10% or 15% on a single large purchase. The long-term interest charges will quickly negate that one-time deal.
Coping with Holiday Debt
Despite best efforts, overspending can still happen. If your holiday expenses exceed your budget, take action as soon as possible to reduce and pay off your balance. Contact your credit card issuers to check for cardholder assistance programs or temporary hardship offers with reduced interest rates or flexible payment plans. Consolidating balances to a lower APR card is another option.
If you are unable to make progress on credit card debt, reach out to a reputable nonprofit credit counseling agency like the NFCC for advice and debt management assistance. They offer free consultations and customized action plans.
FAQs
Conclusion
The holiday season brings joy along with financial stress for many families. By planning, tracking all expenses, and leveraging credit card rewards prudently, you can minimize overspending damage.
Set a realistic budget and gift cap for each recipient. Shop with cash-back cards but avoid store cards with high interest rates. Start paying off balances early and contact issuers for assistance programs if needed.
If debt continues, please ask for advice from a nonprofit credit counseling service. With some discipline and smart strategies, you can enjoy the holidays while keeping your finances healthy into the new year.
Pacific Debt, Inc.
If you have overused your credit cards and you’re neck-deep in debt, you may need additional help if you’d like more information on debt settlement or have more than $10,000 in credit card debt. We may be able to help you become debt-free in 2-4 years.
*Disclaimer: Pacific Debt Relief explicitly states that it is not a credit repair organization, and its program does not aim to improve individuals' credit scores. The information provided here is intended solely for educational purposes, aiding consumers in making informed decisions regarding credit and debt matters. The content does not constitute legal or financial advice. Pacific Debt Relief strongly advises individuals to seek the counsel of qualified professionals before undertaking any legal or financial actions.
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