Planning to Use Your Credit Card for Holiday Purchases? Do This First

The holiday season is expensive. A recent PwC survey found that Americans expect to spend about $1,530 this year for travel, gifts, and entertainment costs.

Whether you're planning to go all out and spend more than your fellow Americans or you are hoping to spend less from your bank account, you need a plan for how to cover these holiday costs. Ideally, you should have money saved for them so you don't go into debt. But even if you don't, it can pay to charge your gifts on a credit card so you can earn rewards and take advantage of cardmember benefits like extended warranties.

Before you break out a credit card, though, there's something you'll want to do first.

Make sure your credit card rewards program matches your spending

Prior to beginning your holiday purchases, think about the kind of spending you plan to do the most, and make sure your rewards card is going to give you as many bonus miles, points, or cash back as possible for that kind of spending.

Say, for example, that travel accounts for the bulk of your holiday expenditures because you pay for a trip to see family and you buy plane tickets for several of your loved ones as a gift. Let's also say this travel spending totals $1,500.

If you have a card offering only 1% cash back on travel purchases, you'd only get $15 in rewards. But if you have a travel credit card providing 5% back on travel booked through the card issuers portal, such as the Chase Freedom Flex℠, you would instead get $75 in rewards. If you didn't have the right card, you'd be passing up $60 for no reason.

At an expensive time of year, every dollar counts, and $75 is a lot of dollars. Using the wrong credit card with a rewards program that is not a good fit is clearly not a smart financial move.

How to find the right card for your holiday shopping

To find the right card for holiday shopping, take a look at credit card statements from years past to see where you spent the most over the festive season. And make a holiday budget for this upcoming year to see where you plan to incur the bulk of your expenditures.

Once you know what kind of spending you're going to do, it's just a simple matter of researching some of the best credit card rewards programs to find one offering the most rewards possible for whatever category of spending you'll be focused on. You can apply online for most cards once you find a good one, and you may even be eligible to get a new cardmember bonus in addition to earning extra rewards for the things you're buying over the holidays.

Just be sure before you use any card that you have a plan to pay off the bills ASAP, ideally without owing interest, since interest adds so much to your expenses that it negates the value of any rewards you may earn.

If you don't plan to carry a balance, though, then you can focus on rewards as a primary factor in choosing the holiday card that's right for you.