The holidays are the best of times and the worst of times. They’re a great excuse to catch up with family and friends, take a break from work and remember what’s truly important. They’re not so great for either your wallet or your waistline.
Using the right credit cards strategically or signing up for a new one won’t do much for your waistline — but both can help you recoup some of your holiday spending. Here’s what you should keep in mind.
Holiday spending brings bonuses within reach
Many credit cards offer sizable sign-up bonuses, but there’s a catch: Claiming that bonus typically requires charging a certain amount during a certain time period. It might be more than you’d be comfortable spending under normal circumstances.
But if you’re like many Americans, the holidays aren’t normal circumstances. You’re likely to spend more than usual, whether it’s on plane tickets, gifts or free-range organic turkey. And you might as well use the opportunity to meet the requirements for a fat sign-up bonus. Some are worth hundreds of dollars.
Proceed with caution, though. It’s not wise to sign up for a credit card solely for the bonus. Applying can ding your credit score temporarily, and issuers frown on people who open new cards too frequently. Look for a card that pairs a sign-up bonus with ongoing rewards that will keep paying you back long after the holidays have passed.
It’s time to maximize travel rewards
Many travel credit cards grant higher rewards rates for travel-related purchases. Some provide a boost only for flights or hotel stays booked through their websites, but others reward an array of purchases, such as Airbnb stays, Amtrak tickets and Uber rides.
If you’re traveling this season, consider dusting off an old travel credit card account or applying for a new one. You’ll earn points or miles, and your card might offer other travel perks. Weather delays loom over holiday travel, so a card with travel insurance, delayed baggage coverage or access to airport lounges can be especially helpful. Co-branded airline cards typically give you free checked bags.
The holidays are a prime time to earn a sign-up bonus on a new card, but it’s probably too late to use that bonus to pay for this year’s holiday travel. A 2016 NerdWallet study found that it’s best to apply for a travel card at least five months before your big trip. That gives you a chance to receive the card, earn the bonus, have it credited to your account and book travel early enough to get a good rate. Still, a sign-up bonus you earn now can save you money on spring break, summer vacation — or next year’s holiday travel.
Smart shoppers spend strategically
Travel may be the biggest holiday expense that comes to mind. But even if you’re celebrating at home or driving to Grandma’s, the costs can add up.
If you’re hosting a holiday meal: Unless you’re holding a potluck, you’ll probably spend a lot on groceries between mid-November and New Year’s Day. A credit card that pays a higher rewards rate on grocery store purchases will help. Better yet, because groceries are a year-round expense, the card will provide rewards after the tinsel is cleaned up.
If you’re buying a lot of gifts: Some credit cards with rotating bonus categories offer higher rewards rates at department stores, Amazon or other large retailers during the fourth quarter. Look for one that rewards purchases from the places you’re likely to spend the most on gifts. Alternatively, if you tend to buy from just one store, find out if it offers a store credit card with extra discounts. If you do that, though, plan on paying your balance in full every month. Store cards charge notoriously terrible interest rates.
Spend a comfortable amount: As much as you want to see their little faces light up, don’t run the risk that your kids will outgrow their holiday gifts before you’ve paid them off. Set a budget so you won’t be stressed when the bills arrive. Credit card rewards can ease the pressure on your bank account during the holidays, but they can’t replace a wise spending plan.