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How to Make the Most of Your Holiday Credit Card Spending

Make the most of your holiday shopping with the right kind of credit card use.

November 17, 2022

According to the National Retail Federation, Americans planned to spend an average of $998 each for gifts and other holiday expenses in 2021. Retail sales in November and December of 2021 hit a record-breaking $886.7 billion.

While the holiday season can be a magical time, it can also stress your budget. So, it should be no surprise that many people look for holiday credit card offers to make these purchases more manageable.

The problem, of course, is that this causes many to go into unnecessary debt. CNBC reports that 36% of shoppers went into debt because of their holiday spending in 2021, with an average debt of $1,249.

In reality, even the best credit cards won’t be that helpful if they cause you to go into debt. With that in mind, here’s a closer look at how you can avoid going into debt during the holidays, improve the way you use credit cards and what to consider if you decide to apply for a new holiday credit card.

How to avoid going into debt with holiday credit card spending

Chances are, you’ll be pulling out your credit card a lot this holiday season. But that doesn’t mean you have to go into unmanageable debt. By carefully planning how you’ll use your credit card for your holiday shopping, you can avoid hurting your finances — and possibly even lower holiday expenses. 

Set a budget

Set your Christmas budget and start saving as early as possible. To determine how much you’ll need and create a savings plan, look at what you spent on the holidays last year, and divide that by the number of weeks until December. For example, if your holiday budget is $500 and there are 10 weeks until Christmas, you would need to save $50 per week to cover everything. 

You can even put this money in a separate savings account to withdraw as needed once you start shopping.

Spread purchases out over the year

Rather than putting hundreds of dollars of gift purchases on your credit card all at once, another way to avoid swamping yourself with credit card debt is to spread out holiday purchases throughout the year. They will be much easier to pay off when you’re only paying off one or two gifts at a time.

Make sure you can pay off your credit cards in full

No matter when or how much you spend, make sure you can pay off your credit card in full by the end of the month. High interest rates can quickly increase how much debt you owe. The higher the balance left on your card, the more that debt compounds each day.

Take advantage of rewards offerings

Many credit cards offer a wide range of rewards programs — and the holidays are the perfect time to take advantage of them. For example, a cash rewards credit card can provide cash back rewards to your bank account or a statement credit that lowers your monthly credit card bill.

Other rewards credit cards let you use points to buy gift cards or earn shopping credit at major retailers. The holidays are the best time to use these rewards; with cash back and gift cards, you can significantly reduce how much you spend.

Also, be mindful of bonus categories that offer a higher reward rate during the holiday season. Spending in bonus rewards categories means you’ll get more points for cash back or other perks, making it easier to manage expenses after the holiday.

What to look for if you open a new holiday credit card

During the holiday season, you could be tempted to sign up for a new credit card. You might feel like you need more available credit to complete your shopping, and you could receive 0% APR balance transfer card offers in the mail. It’s also common to be offered a store credit card at the point of sale to save a certain percentage on that day’s purchases.

Such situations could easily lead you to take out multiple new cards, making it harder to keep track of your spending.

If you find yourself considering a new holiday credit card, here are a few details to consider.

Make sure the intro offer will actually help you save

Many credit card companies offer an activation or sign-up bonus for new account openings, and there may be more than usual available during the holidays. But before you jump at an attractive offer, make sure it’ll really help you save money.

For example, some cards may offer a 0% intro APR when you transfer a balance from another credit card. Other cards may offer a cash-back bonus if you reach a certain spending threshold within the first few months of opening your account. And during the holidays, many store credit cards will offer discounts on purchases that you make with them.

These offers can be beneficial — if used in the right way.

First, as mentioned earlier, before opening a new card to earn savings on a purchase, make sure you’ll be able to pay off the credit card balance in full when the bill comes due. Otherwise, the interest charges you accumulate will likely negate any savings. This is especially true if you spend more than you can afford when trying to earn a cash-back bonus.

Second, be mindful of any fees that could offset your potential savings. For example, the card may come with a balance transfer fee or annual fee that could be more than you were able to “save” with the perks. And after the introductory APR period is over, a higher variable APR could cause you to rack up debt on your remaining balance.


Look for rewards that match your spending

Credit card issuers offer a variety of rewards cards for different lifestyles. If you need to get a new holiday credit card, look for one that offers rewards in the spending categories that best match your normal shopping habits. 

For example, a store credit card offering one-time savings is probably not worth signing up for if you rarely shop there during the rest of the year.

On the other hand, if you shop at a retailer throughout the year, a store credit card might be worth it. If you do most of your shopping on Amazon, the Amazon Prime Rewards Visa Signature card could be a good fit since it offers 5% cash back on purchases and lets you shop using points.

Other rewards programs, like those offered by Chase Freedom Flex or Chase Ultimate Rewards, use rotating categories. Bonus points are provided for different categories throughout the year. So, during one quarter, you might get a 5% cash back bonus on purchases at grocery stores and gas stations, while the next quarter might provide bonus rewards at Walmart or on streaming services.

Check credit card reviews to see how offerings from Visa, Citi, Capital One, American Express and others compare to find the option that will best reward your spending.

Learn how a new card could affect your personal finances

Accidentally spending too much isn’t the only way a holiday credit card could affect your finances; it can also have an impact on your credit score.

For starters, if you overspend and accumulate too much debt with your new card, it could negatively affect the “amount of debt” credit scoring factor. Plus, if you end up applying for several new credit cards during the holidays, you’ll end up with several hard credit inquiries on your account, which will lower the average age on your credit accounts and can cause your score to drop. 

In addition, if you cancel your card within a few months of account opening — or even the first year — you’ll lose access to any rewards that you haven’t already redeemed. In addition, canceling your card could hurt your credit score by reducing your available credit.

But if you keep your spending in check, a new card could increase your total available credit and lower your credit utilization ratio, which could help improve your credit score over time.

Be careful with holiday credit card spending

Special welcome offers and promotions could make you want to apply for a holiday credit card. But before you jump for what seems like a great credit card offer, take a step back and consider whether you really need a new card. 

In reality, you’re much better off setting a firm budget and spreading out holiday purchases so you can pay off your current card in full at the end of the month. Taking advantage of rewards programs can help you save even more on eligible purchases.

If you do get a new holiday credit card, be mindful of both the available perks and how that new card could affect your finances and spending habits. There’s no such thing as the “right credit card” if it causes you to take on more debt than you can afford.

If excess credit card debt from holiday spending has become a struggle to pay off, Tally† may be able to help. The Tally app combines your monthly credit card payments into a single lower-interest line of credit so you can pay off higher-interest credit card debt faster.

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.