Holiday Shopping Can Ramp Up Rewards
By Eva Norlyk Smith Ph.D.
November 19, 2012
I spend probably $2,000 when all is said and done in the month of December on Christmas gifts for my grandkids, friends and coworkers. I usually pay with my debit card or my regular credit card from my bank, but I’d like to earn some rewards.
What kind of credit cards should I be looking at? I’d like a card that I don’t even have to think about when it comes to reclaiming rewards. It’s just that a nice kickback for all that spending would be nice. I have good credit. — Martin
Smart of you to think ahead, because you could easily earn from around $200 to $500 in rewards savings by picking the right rewards credit card for your holiday shopping.
How? The nice thing about charging $2,000 to a rewards card in a short time is that you will not just earn rewards on credit card charges, you can also qualify for a nice, fat sign-up bonus on your new card.
For best results, look for a rewards credit card that fulfills two criteria: higher-than-average rewards earnings and a sign-up bonus. Many sign-up bonuses require you to charge a certain amount within a short timeframe, so holiday shopping can be a perfect fit.
Here’s a sampling of some of the best rewards card offers that combine high rewards earnings with easy redemption and great bonus sign-up offers.
Chase Freedom Visa
If your loved ones don’t mind getting most of their presents from Kohl’s or Best Buy, you can earn 5 percent cash back on all your holiday shopping (for up to $1,500 in purchases) with the Chase Freedom rewards card.
The Chase Freedom card offers 5 percent cash back in rotating rewards categories, and through December 31, all purchases at Kohl’s and Best Buy qualify for the 5 percent category. So do travel purchases like hotels and airline tickets. So if you’re planning to travel over the holidays, those purchases will qualify as well.
Sign-up bonus: The Freedom card comes with a nifty little sign-up bonus — charge $500 within the first three months, and you get $100 in bonus cash back.
Total rewards earnings. If you charge your entire $2,000 Christmas shopping budget to the Chase Freedom card, total rewards earnings will be $180. That’s $75 on your first $1,500 in charges at a 5 percent rebate, $5 for the remaining $500 in charges at the regular 1 cash-back rate, plus the $100 sign-up bonus.
Blue Cash Preferred from American Express
Want a card that will supercharge rewards earnings not just during the holiday season but throughout the year? With the Blue Cash Preferred, if you do your Christmas shopping at select major department stores, you can earn 3 percent cash back on all holiday purchases.
While that may not sound as sexy as the Chase Freedom, wait till you see what the card can do for you the rest of the year. Cardholders also get 6 percent cash back on grocery purchases (for up to $6,000 in purchases each calendar year), 3 percent cash back on gas, and 1 percent on everything else. Because groceries tend to be one of the largest household expenses, that can add up over time.
Sign-up bonus: Charge $1,000 to the card within the first three months of membership, and you’ll earn a $150 sign-up bonus.
Total rewards earnings: If you do all your Christmas shopping at qualifying department stores, you could earn as much as $60 cash back on purchases, plus the $150 bonus for a total of $210 in savings. Subtract from that the $75 annual fee, and total savings are $135.
If you prefer a card without an annual fee, AmEx’s Blue Cash Everyday card lets you earn 3 percent back on groceries and department store purchases, 2 percent on gas, and 1 percent on everything else. The card comes with a $100 sign-up bonus, putting your total rewards earnings at $160 ($60 for your holiday purchases, plus the $100 bonus). However, with the extra savings on groceries throughout the year, you may find that the $75 annual fee on the Blue Cash Preferred is well worth it.
Chase Sapphire Preferred card
If you travel frequently and are looking for a rewards card with a sign-up bonus you can believe in, check out the Chase Sapphire Preferred card.
If you are member of a frequent flier program, Sapphire rewards points can be transferred on a 1-to-1 basis to a number of frequent travel programs, an added benefit.
There are a couple of downsides of the Chase Sapphire card: While you earn two rewards points per dollar on travel and dining, you earn only one point on all other purchases. In addition, the card comes with a $95 annual fee, waived the first year.
Sign-up bonus: New cardholders get 40,000 bonus points when they spend $3,000 within the first three months, worth $500 toward travel rewards. While that is higher than your holiday budget, you do have an additional two months to fulfill the remaining spending requirement.
Total rewards earnings: Assuming you’ll be using your holiday spending money on presents, not travel or dining, total rewards earnings will be around $20, plus the $500 bonus toward travel rewards, for a total of $520.
That easily gives you the highest rewards earnings in the short term — assuming you can redeem all those travel rewards points. In subsequent years, when the $95 annual fee kicks in, however, because the card offers just one point per dollar on most purchases, the Sapphire card could easily end up costing you more money than you’d earn. Redeeming for travel rewards may also involve a little more legwork than you’re willing to put in, which is another consideration.
In short, if you want the greatest long-term savings with the least hassle, one of the other rewards cards above will be your best option. Happy holiday shopping!
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