Far too many young people shy away from credit cards. Only 33% of people between 18 – 29 even have a credit card.
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As Tylor Tourville swipes his credit cards throughout the year, he builds up rewards points. Then, when he’s ready to do his holiday shopping, he redeems them, mostly for cash-back credits on Amazon.
“It adds up, so I have a decent amount to at least put a dent in the spending,” the 27-year-old says. One year, Tourville, who works in public relations in Boston, used his cash-back credits to buy a foosball table for his parents and five younger siblings in Florida.
“It improves the quality of the gifts to a degree,” he says, adding that his Amazon rewards add up to about $200 a year.
Credit card rewards points can help stretch your holiday budget, if you know how to use the power of plastic without accumulating debt. Interest payments can quickly cancel out the value of any rewards. But as long as you pay off your balance each month, you’ll come out ahead.
Here are four ways to leverage your credit cards to buy better gifts this holiday season.
Cash in points for gift cards
Every year, credit expert John Ulzheimer cashes in his accrued credit card rewards points for $25 iTunes gift cards, which he gives to his nieces and nephews.
“I get a stack of eight and use them for family members as their Christmas gift,” he says. His nieces and nephews use the gift cards to buy movies, books, videos or music. According to the National Retail Federation, gift cards top the list of what people would most like to receive.
Ulzheimer says using his points for gifts also helps him avoid letting them go to waste.
“It’s a really good reminder to use those points,” which he says many people forget to do. “It helps me leverage the rewards program of my card, and also gives people gifts they want.”
Be aware that gift cards offer limited versatility and may not offer the highest point redemption value, and make sure that your recipients enjoy shopping at the card’s retailer.
Find special offers or built-in benefits
If you have an American Express card, online shopping expert and SheFinds.com founder Michelle Madhok suggests going to your account online or using the app to opt in to special offers. Then, when you use your AmEx card to buy gifts at those partner retailers, such as Macy’s or Crate & Barrel, you’ll receive a statement credit. Some AmEx and Mastercard cardholders also have access to a membership at Shoprunner, which offers free two-day shipping and free returns at over 100 retailers.
Some card issuers offer price protection, which means if the price for an item drops after you purchase it, you are eligible to receive the difference.
“Know which credit card to use for which purchase,” Madhok says.
Use bonus malls and other redemption methods
Andrea Woroch, a money-saving expert, suggests exploring different options for redeeming rewards points, which include bonus malls, online shopping portals where cardholders can stretch their rewards by earning discounts or additional rewards. Woroch says that some cards offer bonus rewards if you deposit earned cash back into a bank account with the same bank as your card issuer.
“Getting something extra back is a no-brainer,” she says. “The bump I get translates into bigger dollars,” she adds. “You can track how much you are going to get back and then use that as your gift shopping budget.”
Consider store credit cards
Eyeing a big-ticket gift? If you open a store card, you may get a one-time discount on that large purchase. “It’s a great idea if you are someone who is organized,” Madhok says. That’s because many store credit cards have higher interest rates, which could add up if you don’t pay off the balances quickly.
It’s worth noting that applying for a new credit card often puts a temporary ding on your credit score. If it’s not a store you shop at frequently, you may be better off applying for a general rewards credit card.
Before thinking about ways to leverage a credit card for the holidays, make sure you’re already in the habit of paying off your bills when they come due. If you’ve struggled to do that in the past, “now is not the time to say, ‘Let me see if I can use credit cards responsibly,’” says Tiffany Aliche, also known as “The Budgetnista” and author of The One Week Budget. It can be easy to overspend on gifts, and no one wants to start the new year with additional credit card debt.
But as long as you know you can pay off your balance in full each month, maximizing rewards through strategic credit card spending for the holidays is smart, Aliche says.
Kimberly Palmer is a writer at NerdWallet. Email: firstname.lastname@example.org. Twitter: @KimberlyPalmer.
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