One smart way to get a deal on the things you buy this holiday season is to pay using rewards credit cards, according to Consumer Reports.
If you choose the right ones, you can double the fun: Buy an iPad or two for your spouse and kids, shop for your turkey dinner and pay for a flight to visit grandma, and you'll wind up giving yourself a gift, too. Consumer Reports found that if you charge your purchases on two cards instead of one, you could earn 10 to 40 percent more in rewards over time in the following scenarios.
The full house
You belong to a typical American family. You have a spouse and two kids, and you spend about $300 on gas and $500 on groceries every month, according to the Bureau of Labor Statistics. On a credit card budget of $3,500 per month, you're also spending on clothes, drugstore goods, entertainment, travel, restaurant meals and utilities.
• Your cards: American Express Blue Cash Preferred Card; Capital One Venture
• Your strategy: Charge your monthly gas and grocery expenses to the American Express card to earn 6 percent cash back on groceries (on up to $6,000 over 12 months) and 3 percent cash back on gas. Use the Capital One card for everything else because it offers 2 miles for every dollar you spend in all categories.
• Rewards total: $3,550 over three years.
Whether it's for work or play, you spend lots of time on planes and in hotels, and you want to earn rewards so that your next trip is free. Seventy percent of your credit card spending is in travel-related categories such as airfare, hotels, rental cars and restaurant meals, and you charge a total of $3,000 per month.
• Your cards: Capital One Venture; PenFed Premium Travel Rewards American Express Card
• Your strategy. The PenFed card gives 5 points on every dollar spent on airfare but only 1 point on all other spending. So use it to buy your airline tickets, but charge other expenses to the Capital One card, which gives you 2 miles for every dollar you spend. It also gives new cardholders 40,000 bonus miles if they spend a total of $3,000 in the first three months. The PenFed card gives 20,000 miles if you spend $2,500 in three months. Neither card charges foreign transaction fees. One caveat: To get the PenFed card, you have to first join the PenFed Credit Union.
• Rewards total: $3,400 over three years.
Your ongoing expenses include advertising, communications costs, gas, travel and dinner with clients. You need cards that either give you cash back that you can reinvest in your business or provide travel points that you can use for future business trips. An analysis by Shoeboxed, which tracks small businesses' spending, found that owners' expenses average $2,245 per month. But that study was from three years ago, and business expenditures have been rising, according to the National Federation of Independent Business. So Consumer Reports estimates that you're charging $2,500 per month.
• Your cards: PenFed Platinum Cash Rewards Visa Plus; Capital One Spark Cash for Business or Capital One Spark Miles for Business.
• Your strategy. Use the PenFed card for gas because it offers 5 percent cash back. Charge everything else to the Capital One Spark Cash card, which gives you 2 percent cash back (plus a $500 cash bonus if you spend $4,500 in the first three months). To earn free travel perks instead, swap out the Spark Cash card for Spark Miles. You'll earn an equivalent of 2 miles per dollar spent. You'll also get the same sign-up bonus you can use for travel. Neither Capital One card charges a foreign transaction fee, and your rewards never expire.
• Rewards total: $2,500 over three years.
For more information, visit ConsumerReports.org.
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