The holiday season and credit cards are known to have a complicated relationship. Depending on who you ask and what you read, you may be compelled to either tuck away your credit card (or freeze it in a block of ice) or charge every purchase you can think of on plastic in order to maximize your rewards during the holidays.
The best use lies somewhere in the middle, as a credit card that’s being used responsibly and strategically can unlock unique opportunities to save on your holiday shopping list. Below, we list out five smart and responsible ways you can use your credit cards this holiday season.
Creating a shopping budget for the holidays isn’t new advice, but to ensure you actually stick to it and avoid overspending, you’ll want to go beyond simply writing out what gifts you plan to buy.
Begin by listing out all your expected holiday expenses (not just gifts, but dinners and travel too) and start assigning a spending limit for each type of purchase. You’ll also want to take into account how many people you plan to buy presents for as well as your income and regular expenses, such as rent and electricity bills.
It’s not enough to create a mental budget – you’ll want commit in writing (on paper, a spreadsheet or budgeting calculator). It’s also important that you’re realistic with your budget, as there’s no point in investing time in an overly-idealistic plan that you won’t be able to follow through on. Try reflecting on your spending habits from last year to avoid making the same mistakes and consider creating a budget with a friend or a family member who can hold you accountable.
If you’re a disciplined spender with a budget in mind, using a credit card can be an effective way to rack up some savings during the holidays. Many of the best credit cards in Canada offer 1% to 4% back for every dollar you spend in the form of cash back or points, which can help you recoup some of the money you plan to spend on gifts or upcoming travel. A number of credit cards also come with lucrative welcome offers when you first sign up that allow you to earn double or triple the rewards for a limited-time, further accelerating your savings.
It’s important to note however, a credit card should only be used for purchases that you can afford to pay for at the end of the month. Otherwise, you will carry a balance and get hit with costly interest charges that will cost you more much more than you’ll earn from the rewards or the cash back incentives. So, keep track of your spending and pay off your credit card statement in full and on time.
If you want to take advantage of the ability to earn credit card rewards but are worried about getting swept up in the holiday shopping craze and overspending, relegate your card use to a limited number of necessary purchases. For example, if you’re embarking on a long road trip to visit family members over the holidays, consider using a cash back credit card to cover the gas bill and debit when buying presents.
When it comes to hunting for holiday deals online, many of us reflexively type Amazon or Walmart into our browser’s search bar. However, one of the best ways to rack up additional points on your credit card (and save more) is to shop from the online e-store run by your loyalty program.
A number of major loyalty programs in Canada – from Aeroplan to Air Miles and more – host e-stores which allow you to net bonus points on top of what you would normally earn from your travel credit card. So, instead of earning 1 or 2 points per dollar on your gift purchases for example, you could earn 3 or 4 points per dollar. Depending on your holiday shopping list, that can add up to considerable value. Most loyalty program e-stores offer a range of products and gadgets from major brands, so you won’t have to compromise on your gift choices.
Additionally, loyalty program e-stores allow you to redeem the points you’ve already racked up for merchandise or gift cards, which you can then gift to your friends and loved ones. While you reap far more value from your points when redeeming them for travel compared to merchandise, the ability to use points for gifts can come in handy – particularly if you want to limit your spending.
Aside from offering cash-back or travel points, many credit cards offer ancillary benefits that can help you pocket additional savings on your holiday purchases.
For example, several credit cards automatically double the manufacturer’s warranty on items you purchase (so you won’t have to shell out extra money at the sales counter for an extended warranty and added peace of mind). Price protection is another money-savings benefit available on numerous cards that will reimburse the full or partial difference on an item you purchased in the instance it drops in price (similar to price matching guarantee).
Additionally, many cards offer steep discounts on car rentals, which can come in handy if you need to reserve a rental during the holidays to visit family located out of town.
One of the best ways to avoid missing a payment or carrying a balance is to take a proactive approach to paying off your credit card bill.
First, ensure you’re set up to receive notifications when your credit card payment is due. You may want to consider setting up a dedicated calendar update or even sticking Post-It notes on your computer, as email alerts from your bank about credit card statements can quickly get buried in your inbox.
You may also want to consider scheduling small, regular payments from your chequing account to your credit card in order to chip away at your bill over time and avoid being faced with one giant statement at the end of the month.
YOUR FREE FINANCIAL PLAN
The best financial plan is also the easiest.
Build your free plan today.
Start now
Planning for retirement is a vital endeavor that requires careful consideration and strategic financial management. While ideally, retirement savings should begin early in one's career, life circumstances often lead individuals to start their retirement planning journey later in life.
Both HSA and FSA accounts offer tax advantages on medical expenses, but which account is best? We've got a breakdown to help you decide.
Now that retirement is on the horizon you'll have to decide what to do with your time. here's a list of 42 inexpensive hobbies to try!