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Tips for Using a Credit Card for Holiday Shopping

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As the weather cools, the question of how to manage holiday expenses often bubbles to the surface. A budget and dedicated savings account are excellent places to start, but there’s one way to take your spending plan to the next level: credit cards.

While they can be a tricky financial tool, especially if you aren’t used to tracking your finances, there can be significant upsides to using a credit card.

Here’s what you should do to get the most out of your credit card for holiday purchases.

5 tips for using a credit card for holiday shopping

No. 1: Leverage credit card rewards

“The right credit card, used wisely, can extend your holiday shopping budget,” says Matt Schulz, LendingTree chief credit analyst. “If you don’t take advantage of credit card rewards, you’re leaving money on the table.”

Many rewards cards offer 1% to 2% cash back, although some cards go as high as 5%, 6% or 8% for specific spending categories. If it’s a cash back card, you may be able to use those rewards to pay down your balance — getting a discount on what you charge. Of course, it’s critical to know which card will give you the best return and not go overboard on spending.

No. 2: Pay off your charges ASAP

“One great move is to pay for your holiday purchases with a credit card and use that cash that you’ve saved for holiday shopping to pay off your credit card,” Schulz says. “That way, you’re getting the best of both worlds: earning rewards and avoiding debt.”

This can also help boost your credit score since you’d keep your balances lower (or, ideally, at zero). Check in with your spending regularly so you can pay it off before incurring interest charges.

No. 3: Avoid store cards

It can happen instantly: You’re shopping for presents or decor. As you check out, the cashier asks if you want to sign up for their store credit card. They may mention a promotional period. But you should use caution, Schulz says.

“Generally, it’s wise to avoid store credit cards,” Schulz says. “If you’re 1,000% sure that you can pay them off at the end of the month, they can be useful because of the discounts and perks. However, steer clear of these cards if you’re likely to carry a balance. They tend to have higher interest rates than regular credit cards, and that’s something in today’s sky-high-interest-rate world.”

No. 4: Be realistic about your budget

“Before you go shopping, make a plan,” Schulz says. “Having a list of what you’re going to buy and how much you’re able to spend can help you avoid potential issues and keep you from blowing up your budget.”

Once you have an idea of your total expenses, see if you need to cut any extras or downsize.

“Credit cards can be a useful tool, but they can also be dangerous,” Schulz says. “They make it really, really easy to overspend, and that’s especially true in the holiday season when we’re all bombarded with offers of great deals.”

No. 5: Consider a balance transfer card

A balance transfer credit card may prove useful if you don’t have enough savings to cover your anticipated expenses. Those often come with a promotional 0% APR for several months. However, opening a new credit card would impact your credit score.

Used responsibly, a balance transfer card could allow you to buy necessities without paying a lot in interest charges (though you’ll likely pay a fee for the transfer itself.) Ideally, you’d get a rewards card that also offers a balance transfer. That way, you’d fully maximize that credit inquiry and make the most of your holiday budget.