NEW YORK (MainStreet) It's time to talk about holiday helpers, and I don't mean the elves. I'm talking about trimming your spending, even as you trim that tree.
With Thanksgiving fast approaching, the flag is officially about to drop on holiday season. Pay no attention to the Santa already in front of the curtain. The holiday spending season officially begins once we've carved up our turkeys and regular season college football ends.
It's not cheap either. According to one survey, Americans plan to spend over $1,000 per household on the holidays this year. Almost a fifth of us might spend as much as $5,000, with hundreds more at restaurants. That's obviously a lot of money, so in between making your list and checking it twice, it's probably worth figuring out how to recapture some of that value.
Erik Larson, founder of the consumer reporting site NextAdvisor.com, recommends that consumers take advantage of credit card reward programs. A good idea under any circumstances, the points, cash back and miles can add up especially quickly when paired up with holiday spending. Of course, knowing that this is a good idea is the easy part. Figuring out which cards and how to use them takes a little more planning.
"You want to work backwards in a couple of ways," Larson said. "Know one, what you're going to spend the money on and two, what you're going to use the rewards for. So if you know you're going to take a vacation this year and you're going to use the rewards for travel, something like the Barclay Arrival card might make sense. But if you're not going to travel and you know you just want cash back, something like the American Express Blue is going to be great."
Planning does make perfect, and tailoring your credit card to your spending habits can help you take the most advantage of it. For example, Larson said, there's no use letting frequent flier miles build up for someone who never flies. Far better to get rewards points on a product you'll actually use, or maybe even straight cash back.
Larson also urges consumers to choose a card that matches their spending habits. As we've all seen with the various "3-2-1" commercials, credit cards offer various rewards for different purchases. An online shopper, for example, could get a lot more value out of Discover from its e-commerce rewards points than someone wandering the aisles of the Bass Pro Shop.
"You want to think about where you're going to be spending," Larson said. "For a lot of people these are their biggest spending months, November through December. You want to think about where you're going to be spending and if you do that you can probably find a card that's going to give you as much as three to five percent cash back."
In other words, there's probably no need to make your spending habits fit the credit card. Odds are, there's one already out there designed to suit you.
One recommendation Larson says he gives to people with heavy shopping lists is the Chase Freedom card. Using a rotating category system, every three months it offers customers a different category of rewards. For the 2013 holiday season, it offers 5% cash back for purchases at both department stores and on Amazon.com, up to the first $1,500.
Another option for people just looking for a strong, all around rewards program, according to Larson, is the American Express Blue. This card gives six percent cash back on groceries and three percent from gas stations and department stores. Although it lacks the efficiency of a more specific rewards program, for example one dedicated to online shopping or travel, Larson recommends the Blue Card as a great all-around card for shoppers without an agenda.
Of course, cards like the American Express Blue or Barclay Arrival, while offering fantastic programs, also tend to have similarly high barriers to entry.
"They require very high credit scores," Larson said of many of the more elite credit card programs. "They're looking for people who have what you call excellent credit. Maybe 30% of the population, maybe less, might be able to get these cards."
For those of us who have less-than-excellent credit--expected enough a reality in an age where many more things lower your credit score than raise it--Larson suggests programs like the Barclay Rewards or Capital One Quicksilver. Cards like these tend to offer less in terms of points and cash back, but they also accept someone who may have missed the odd student loan payment here and there.
The important thing to remember with midrange credit cards is that they'll often come with annual fees or a non-zero APR. Pay attention to the costs of these cards and make sure they're worth it before signing on, especially with anything that carries an interest rate.
"Power users" can also try juggling multiple cards on different lines of credit, depending on what they think they'll need in any given year.
"Watch your balances in the various rewards programs," Larson suggests. "And if they're getting too high and you think you're not going to use it then think about switching to something else."
He also recommends a straightforward cash back card as "the easiest way to go for a hassle free experience."
To help winnow down the options NextAdvisor has created a cash back calculator on their website.
Plug in the amount you plan to spend this season among various categories, and the site will report back a list of rewards cards along with how much you could get back from each one. Although it doesn't yet include more specialized programs like frequent flier miles or non-cash points, the calculator is a fantastic place to start for someone who simply wants to know which card will return the most money to their wallet.
So while you're planning your holiday spending this year, take a few minutes to look for ways to keep some of that money. It might be worth your while.
--Written for MainStreet by Eric Reed, a freelance journalist who writes frequently on the subjects of career and travel. You can read more of his work at his website www.wanderinglawyer.com.