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How to Decide Which Credit Card to Swipe for Every Holiday Purchase
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How to Decide Which Credit Card to Swipe for Every Holiday Purchase

Nicole Dieker, Gawker Media

Image credit: Sean MacEntee, CC BY 2.0.

A lot of us spend a lot of money during the holidays: air travel, presents, new clothes, dinners out, dinners in, office potlucks, school parties, and so on.

But we can also earn at least some of that money back through credit card rewards-and since the holidays tend to maximize our spending, it's worth learning how to maximize the rewards we can earn.

I've set out three different ways of earning big rewards this holiday season: one method that takes a lot of work, one method that takes much less work, and one method that's great for people who pay off their cards in full every month. (Obligatory credit card disclaimer: don't let your rewards get canceled out by credit card interest. Pay off your cards in full, every month, as often as possible.)

Method 1: Use the Card That Offers the Highest Rewards

How many credit cards do you currently own, and what types of rewards do they offer? If you want to earn the maximum value from your holiday purchases, you need to take a careful look at the credit cards you're carrying.

Some cards offer a flat cash back rate; the Capital One Quicksilver card offers 1.5% cash back on every purchase, for example.

Other cards offer different rewards for different types of purchases; the Alaska Airlines Visa Signature Card offers 3 miles/dollar when you make purchases on Alaska or Virgin America, and 1 mile/dollar for all other purchases.

Other cards rotate the categories that receive the highest rewards; the Discover It card offers 5% cash back on categories that change every three months and 1% cash back on all other purchases.

If you're planning on getting the maximum rewards from your holiday spending, you'll want to know which of your credit cards offer the best rewards for each category of shopping.

Does one card give you extra points for Amazon purchases? Maybe you'll want to buy presents from people's Amazon Wish Lists. Does another card offer extra points on groceries? Maybe you can volunteer to bring the cookies and the napkins to the class party. If you've got a credit card that offers maximum points on restaurants, you could suggest a holiday dinner out instead of a holiday potluck-and tell your friends they can Venmo you their share of the tab.

This'll take some planning and some work-if you've got the Blue Cash Preferred card, which offers 6% cash back on groceries, you don't want to fill up three carts with enough food for the extended family and then accidentally pay for everything with the wrong card.

But if you have time to strategize, here's how it could pay off:

  • $500 on groceries: $30 cash back with the Blue Cash Preferred card
  • $500 on flights: 1,500 miles with the Alaska Airlines Visa Signature Card
  • $500 on Amazon: $25 cash back with the Discover It card (if Amazon is the featured category that quarter)
  • $500 on purchases that don't fall into any higher-value rewards category: $7.50 with the Capital One Quicksilver card

Your individual rewards will, of course, depend on which cards you own and how much you spend.

Method 2: Go for Airline Points and Miles

If trying to remember which card offers 6% cashback for groceries and which card offers 5% cash back for Amazon purchases feels like adding another layer of stress to your holiday shopping, you can also earn significant rewards-and maybe even a free flight-by putting everything on your preferred airline card.

Most airline credit cards give you the highest percentage of points or miles when you make purchases from that airline, so use that to your advantage when you book your holiday travel.

Then keep swiping your airline card for every other holiday purchase, and watch those miles rack up.

Let's say you have the United MileagePlus Explorer card, and let's say you spend $900 on flights and $1,200 on gifts, Lyft rides to the airport, that new outfit you bought for NYE, and so on. You'll earn 2 miles per dollar for the flights and one mile per dollar for the other purchases, or 3,000 miles total. That'll get you about a third of the way towards a free flight, depending on where you're traveling.

Yes, you might earn slightly less than what you would have gotten if you used the "highest rewards" method (depending on which credit cards are currently in your wallet) but, thanks to the fact that we are irrational economists, you'll probably be a lot happier to use those miles to book a free flight than you would have been using your cash back rewards to knock a little bit off your credit card bill.

Method 3: Open a New Credit Card

Credit cards offer their highest bonuses to new users, which means that if you have good enough credit to open a new card, you can rack up some serious rewards.

What kind of rewards? It depends on the card. The Capital One Quicksilver card offers a bonus $150 cash back if you spend $500 in the first three months of opening your account; the Chase Sapphire Preferred card offers 50,000 bonus points-worth $625 in travel purchases when you redeem through Chase Ultimate Rewards-if you spend $4,000 in the first three months.

Opening a new credit card may ding your credit score slightly, but if you're the kind of person who pays off their credit cards in full every month, adding a new card can actually increase your credit score. You'll have more credit available to you, but you'll still be using roughly the same amount of credit every month-especially after the holidays are over-which means your credit utilization ratio will drop and your credit score could go up.

If you're not the kind of person who pays off their credit cards in full every month, don't get another credit card. (Unless it's a balance transfer card with a temporary 0% APR that you only use to pay down your credit card debt as quickly as possible-but that's another lifehack for another time.)

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