During the holiday season, you’re likely to spend more than usual, buying presents for family and friends, paying for travel, and eating out at restaurants. But in the midst of all that merriment, keep in mind that you can also leverage your credit card to pay yourself back for some of that spending and soften the holiday financial hit.
Cash back credit cards can be used anytime of the year, but the holiday season is a good time to pick a card that will reward you with cash back on a percentage of the dollars you spend, says Ted Rossman, industry analyst at CreditCards.com (opens in new tab). Shop for cards that specifically offer rewards for shopping in the fourth quarter of the year, for example, and you could get as much as 5% back on your gift purchases, he says, citing the Chase Freedom Visa and Discover It cash back cards.
Cash back cards aren’t as complicated as some travel rewards cards, Rossman says. Older adults, in fact, tend to gravitate to cash back cards more than younger people do, according to research by CreditCards.com. “It’s not that difficult to get a good deal,” he says.
Of course, it’s ideal to pay your credit card balance in full each month. If you can’t, you could be hit with interest rates as high as 17% to 25%, far outweighing any cash-back benefits. When picking the best cash back card for you, carefully compare offers. Think about how you actually spend your money. If your card doesn’t offer cash back for your most frequent category of spending, then your rewards won’t add up to much. “When picking the right credit card, know yourself and what you want out of it,” says Matt Schulz, chief industry analyst at CompareCards.com (opens in new tab).
Consider a cash back card that is “super simple,” Rossman says. The Citi Double Cash Mastercard, for example, gives you 2% back on everything—1% when you buy and 1% when you pay it off—and has no annual fee. Alternatively, you could juggle multiple cards that might offer higher rewards in specific categories, such as dining or travel, but getting 2% back on everything is less complicated and still an attractive return.
Find Your Card
There are a few standouts to consider when it comes to cash back cards. Like Citi’s Double Cash card, Fidelity’s Rewards Visa Signature pays a flat 2% on all purchases. Be aware that you must deposit your card rewards into a Fidelity account, such as your IRA or a 529 college savings account.
PayPal is increasingly accepted as payment online and at many brick and mortar stores, and the PayPal Mastercard pays 2% cash back everywhere you use it, Rossman says. The Capital One Quicksilver Visa gives you 1.5% cash back on everything. If you usually eat out often during the holidays, you could add on to your shopping rewards with the Capital One Savor Rewards Mastercard. You can earn 4% at restaurants, and the $95 annual fee is waived the first year.
Look for signup bonuses, which might be easy to snare if you’re doing a lot of holiday shopping. Chase Freedom, for instance, offers a $150 signup bonus if you spend $500 in the first 90 days. “A lot of this just comes down to maximizing money you would have spent anyway,” Rossman says.
Whatever card you choose, be sure to read the fine print carefully. The Discover It card, for example, pays cash back when you buy online at Walmart.com but not if you purchase from a Wal-Mart store, Rossman says. Other cards may only waive annual fees the first year or have a limit on cash back.
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