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6 ways your credit cards can stretch your holiday budget

by Peter Andrew

The IndexCreditCards.com news blog has recently been overflowing with credit card offers and ideas that are designed to get you to flash your plastic this holiday season. Here is a roundup of some of the best those ideas that could help you use your cards to save extra money.

They're intended for people who don't already have troubling levels of credit card debt, who have reasonable or excellent credit, and who are good at managing their personal finances. If you don't fall into those categories, then you may, come January, find yourself much better off if you stick to cash, checks and debit cards.

1. Save $100 in one easy move

Credit card companies often offer great sign-up bonuses, which you get just for applying for a card, getting approved, and then spending a certain amount (usually at least $500) on it during the first three months after the account's opened. Sign-up bonuses can vary, but those that offer cash back bonuses are often around $100. And that is in addition to the normal rewards you can earn with the products. Cash back cards can offer higher bonuses, however that often requires hitting a higher spending threshold on a card that could have an annual fee.

2. Use rewards credit cards smartly

Many credit card companies operate bonus rewards programs, though you have sometimes to enroll online or through a call center to be eligible. These offer additional rewards (often 5 percent instead of the standard 1 percent) for purchases made within specific categories that change each quarter. If you follow these categories, you can often quintuple the cash back or points you earn, and that could prove a lifesaver if your January turns out to be lean.

These bonus rewards are often capped, so you may need to use different cards offering the same categories in order to maximize your earnings.

Many credit card companies offer even more generous rewards (sometimes up to 20 percent cash back, depending on the retailer) on purchases made through their online shopping portals, such as the Chase Ultimate Rewards Mall, the Citi Bonus Cash Center and ShopDiscover. American Express is also featuring special offers on its Membership Rewards site. So if you're seeking out holiday gift bargains, these could be excellent places to start.

3. Rewards redemption deals

It's not just in earning rewards that you can make savings. Some card issuers also run special redemption promotions. Hotels and airline credit cards often run a period where you can use a fraction of the points or miles required to redeem a stay or flight. So if you use rewards credit cards, keep an eye on your issuers' websites or social media feeds. If you don't mind getting a few extra emails in your inbox, register your card with your issuer to stay connected with promotions.

4. Shop online with confidence

There are going to be some exceptional bargains in bricks-and-mortar malls and stores this holiday. But there are also going to be plenty online. And the National Retail Federation quotes a Shop.org poll that found that "a record 92.5 percent of online retailers will offer free shipping this holiday season." Wow. Save time, save gas, save yourself from all those crowds.

The best thing about using a proper credit card (as opposed to a debit card or a prepaid one) when shopping online is the level of statutory protections you receive. If you're a victim of fraud, or if the goods you ordered are shoddy, were wrongly described or simply don't turn up, you know you're safe from any significant (usually, any--period) personal loss.

5. Find bargains early with your credit cards

Recently, SmartMoney.com ran a feature under the headline: "Holiday Shopping: The Cost of Waiting." It argued that, in the run-up to Dec. 25, there will be many fewer last-minute bargains than previously because retailers have been much more cautious this year in buying inventory. In other words, at least in 2011, you may well be better off doing your holiday shopping early. The National Retail Federation concurs, although it predicts that only the most popular must-have products are likely to sell out soon.

In any event, you might think it's a good idea to buy what you can as quickly as you can. You may even be tempted to take advantage of a store's lay-away program. But think twice. Fox News recently reported: "The return of layaway plans this holiday shopping season is raising concern that the break from credit cards might actually cost consumers far more." Yep, if you compare stores' layaway fees with possible card interest charges, the former often--even with today's high credit card rates--come out very expensive.

One of the great things with credit cards is the interest-free grace period you get between charging a purchase and your next statement's due date if you don't carry a balance. You simply don't get that with any other popular payment method, and it could mean that this year you can get the best bargains while they're still available.

6. Use your credit wisely

Of course, the other great thing about credit cards is that you don't have to pay for everything at once. However, with those high interest rates, that's a double-edged sword, and many prefer to avoid credit card debt altogether. But if you're going to pay down your post-holiday balances over a period of time, you can save yet more money if you do your charging intelligently.

On average, credit card rates are higher for rewards cards than non-rewards ones. That means that it's usually smartest to charge to your rewards credit cards only those purchases that you know you're going to pay down quickly. Everything else should go on low interest credit cards.

Of course, the biggest favor you could do yourself at this time of year is to write out a budget in advance of your spending and then stick to it. Regardless, you could find your money goes much further if you follow these six tips.

Published 11/17/11 (Modified 03/27/13)


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