It doesn’t feel like it’s been a year already but – believe it or not – we will soon be breaking out our credit cards and get started on our holiday shopping lists.
There are many reasons to favor a credit cards over cash when it comes to holiday shopping. But in order to get the most out of your purchases, you should also make sure your credit cards are in the best shape possible. After all, they are about to get a serious holiday workout. Here are a few steps to take to make sure your credit cards are fit for holiday shopping.
Create a budget. Although it’s important to have a shopping list ready and a general idea of how much you’ll spend, you should also create a holiday budget to make sure your spending doesn’t get out of hand. It’s easy to just charge everything without paying attention during the holidays. But after the holidays have passed, you’ll realize that you have spent hundreds of dollars more than you intended – or can actually afford. Nobody wants to go into the new year carrying a lot of debt.
Check credit limits. Make sure that you have a clear understanding of the credit limits on each of the credit cards you plan to use for your holiday shopping. This will not only help you avoid the embarrassment of going over the limit, but will prevent you from unintentionally maxing out your credit cards. If you plan on carrying your balances for a few months after the holidays, it will be more cost-efficient if the balances are low and manageable. Ideally, it’s best to pay your balances in full to avoid paying interest on your gift-giving.
Examine your rewards program. One of the most valuable perks of using your credit cards for holiday spending is the opportunity to rack up extra cash back, miles or other rewards that the card issuer offers. However, because of some quirks in many reward programs, the cards you carry and use may not be earning you all the rewards you are entitled to.
For example, if the majority of your holiday spending falls into categories, such as electronics or department stores, you should check to see which cards offer the most rewards for those types of purchases. Do you plan on taking a big family vacation for the holidays? Make sure you use a credit card that rewards you for your travel purchases. With new cardholder sign-up bonuses and different rewards programs, you could earn much more with a new card than with one you already have.