Credit Card Tips to Help Shoppers Celebrate the Holidays Frugally

In this article

    Learn the strategies to maximize the money you spend on gifts.

    With the right strategy, a credit card can help you maximize every dollar you spend on holiday purchases — and even earn some of them back. But what type of card should you choose?

    A store credit card and balance transfer card combo is usually the scenario that offers shoppers the most benefit. The process looks like this: Shoppers sign up for store credit cards, like the Amazon Prime Store Card or Target REDcard, to capitalize on high-rate rewards; usually 5%. Then, they sign up for a balance transfer card to avoid paying interest. (Many store cards don’t offer introductory 0% APR periods. And if they do, it often comes with a minimum spending requirement.)

    That’s not a steadfast rule, though. Depending on how much you plan to spend, regular rewards cards like the Chase Sapphire Preferred® Card might deserve a second look.

    Here are the most popular holiday retailers and their cards:

    Store CardIn-Store Rewards RateSpecial Financing*
    Amazon Prime Store Card5%6-, 12-, and 24-month
    My Best Buy Credit Card5%6- and 18-month
    Lowe’s Advantage Card5%6-month
    Target REDcard5%None (23.90% APR for purchases)
    TJX Rewards Credit Card10% off your first in-store purchase, then 5%None (27.99% APR for purchases)
    Walmart Credit Card3%None (23.90% APR for purchases)

    * Special financing refers to zero-interest promotions or offers that are available to cardholders.

    Crunching the numbers

    The National Retail Federation surveyed 7,349 shoppers and found that on average, each one planned to spend $967.13 on gifts this year. Let’s take a look at a hypothetical scenario based on that average and compare the value of our two holiday shopping strategies at Target.

    Target REDcard vs. Chase Freedom®

    The REDcard earns 5% back on most Target purchases, so you’ll earn around $48 in store credit. If you don’t plan to pay your balance in full by the end of the month, you’ll need to conduct a balance transfer to avoid paying interest. (We passionately recommend only spending what you have the ability to pay off immediately.)

    The Chase Freedom® earns only 5% on rotating categories, so unless Target is one of them, you’ll only earn 1% on your purchase. But here’s where it gets interesting: If you spend $500 in purchases within the first three months, you’ll earn the $200 signup bonus. Note: You can redeem rewards for cash back and travel, not just store credit.

    A note about rotating categories

    Many cash back cards have schedules that outline which purchase categories earn a certain rewards rate. (It’s usually around 5%.) The categories rotate every three months and often require manual activation — you have to log into your card’s portal and activate the rewards category.

    Here’s a breakdown of a few top cash back credit cards that earn 5% this quarter:

    • Chase Freedom® – Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate. Earn $200 bonus after you spend $500 on purchases in the first 3 months from account opening and earn 5% cash back on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year.
    • Discover it® Cash Back – 5% cash back at different places each quarter like grocery stores, restaurants, gas stations, select rideshares and online shopping, up to the quarterly maximum when you activate. Plus, earn unlimited 1% cash back on all other purchases.
    • Citi® Dividend – Earn 5% cash back at Best Buy through December up to $300 in total cash back per calendar year.

    Choosing the right strategy for you

    A rewards card like the Chase Freedom® isn’t always the most beneficial strategy. Here are the two most important things you should consider as you determine the right credit card strategy for your holiday shopping:

    How much will I spend?

    This is ultimately the most important question of all. Rewards cards generally won’t match a store card’s high-rate rewards. (Unless the store happens to fall into your card’s rotating category, of course.) So if you’re considering a rewards card, make sure that you will be able to spend enough to earn the signup bonus.

    How do I want to spend my rewards?

    Most store cards have high-rate rewards, but it’s important to remember that those rewards exist as a store credit. With a rewards card, you will have far more flexible redemption options, like vacation packages, airfare, cash back, and statement credits.

    It’s also important to recognize the implications for people who plan to shop at multiple merchants. You might have thought, “Why can’t I open up store cards everywhere I go and consolidate my debt with a balance transfer?” You could, but by spreading out your spend, you also spread out your earnings. Having $10 of store credit at five different locations might not be as useful to you as having $50 in one location.

    Please Note: Information about the Discover it® Balance Transfer, Chase Freedom® and Discover it® Cash Back have been collected independently by The issuer did not provide the details, nor is it responsible for their accuracy.

    Editorial Note: Compensation does not influence our recommendations. However, we may earn a commission on sales from the companies featured in this post. To view our disclosures, click here. Opinions expressed here are the author’s alone, and have not been reviewed, approved or otherwise endorsed by our advertisers. Reasonable efforts are made to present accurate info, however all information is presented without warranty. Consult our advertiser’s page for terms & conditions.

    Andy Bowen

    Senior Editor

    Andy Bowen joined The Simple Dollar in 2014 to help people in every state find the right car insurance. Now, he writes about everything personal finance while aggressively paying off his student debt with side hustles, trimming his budget, and racking up rewards points for family trips to Disney. You can find his work on Engadget, AOL, Bankrate,, and AskAudio.