Do’s and don’ts of earning an intro bonus on your holiday shopping

Showering your family with holiday gifts can be a lot of fun, but you should make sure you’re shopping strategically. For example, you have the opportunity to earn something for yourself (and maybe even cover the cost of holiday shopping entirely) as you go about checking off your holiday shopping list – if you pay with a rewards credit card.

You could even sign up for a new credit card and earn a welcome bonus worth hundreds of dollars just by meeting a minimum spending requirement within a few months. If you use plastic to pay for regular bills and expenses and also throw your holiday shopping in the mix, then it shouldn’t be too hard to spend what you need to earn a big bonus.

Take this welcome offer from Amex, for example. The Blue Cash Preferred® Card from American Express is offering a $300 introductory bonus when you spend $3,000 within six months of account opening, which you could easily do with just $500 in spending for six months in a row.

And that’s on top of the 6% you get back on up to $6,000 spent at U.S. supermarkets each year (then 1%) and on select U.S. streaming services, 3% at U.S. gas stations and on transit and 1% back on all other purchases. The card charges a $95 annual fee, waived for the first year.

This card even gives you an introductory APR of 0% on purchases for 12 months, followed by a variable APR of 18.49%-29.49% Variable. This means you have a year to pay down your holiday purchases without interest if you need some time.

The do’s of earning a credit card bonus over the holidays

All that sounds great, but you have to go about it the right way if you hope to actually “get ahead” with a sign-up bonus. While going on a shopping spree is easy as pie, experts point out that what comes next – paying your bill – isn’t always very fun.

Howard Dvorkin of Debt.com says there are many things that can go wrong when consumers use credit as a last-minute tool, and that’s even true when the goal is earning rewards. In fact, Dvorkin says he sees a wave of consumers straddled with credit card debt every January, usually because they thought they could offset their holiday spending with a last-minute sale or offer.

“The truth is, if it isn’t already a line item in a budget, expect to overspend,” he says.

However, not everyone is destined to fail. It all depends on how you approach credit and rewards.

“For someone who already has a budget for gift-giving, this type of offer can be a great way for them to actually put more cash back into their pockets – assuming it won’t hurt their credit and they can pay off the debt in the next billing cycle,” says Dvorkin.

If your goal is getting the most out of your rewards and avoiding debt along the way, here’s what you should do:

Do your research

Money-saving expert Andrea Woroch says it’s crucial to do a little digging and not just sign up for the first card you see.

“Choose a card that offers to reward you on the purchases you make the most or for the stores you shop at the most,” she says.

From there, you can compare sign-up bonuses among cards that already fit with your spending style. That way, you’re more likely to wind up with a card you’ll want to keep for the long haul, which is better for your credit score.

Understand the risks

Thomas Nitzsche, a financial educator at Money Management International, says you should understand the card agreement and program details before you start shopping.

For example, a late payment could cause you to forfeit your rewards, and an annual fee “could cancel out the benefit of the signup bonus,” he says.

Not only that, but Jory McEachern of ScoreShuttle, a credit score management company, notes that a payment more than 30 days late could cause your credit score to drop by 10 to 100 points – or more.

Have a plan

Nitzsche also points out how important it is to only spend when you have the cash to pay off your purchases. After all, racking up interest on your credit card will likely cause you to lose the benefit of the rewards program.

Nitzsche says his firm regularly meets with clients who are losing more on interest than they gain in rewards, yet they may not even know it until they see the math. Some rewards credit cards do offer 0% APR on purchases for a limited time, but you still need a plan to pay off your balances before your offer ends.

Double dip with rewards when you can

According to Bankrate’s 2021 Holiday Shopping Poll, 62% of holiday shoppers will buy mostly online, which means they’ll have the opportunity to “double dip” on rewards by purchasing through a credit card issuer’s shopping portal.

For example, you can earn more rewards when you use Chase credit cards like the Chase Sapphire Preferred® Card or Chase Freedom Flex℠ to shop through the Chase Ultimate Rewards portal, which is connected to a variety of partner retailers. For example, you can often find offers for bonus points from stores like Lowe’s, Macy’s, Best Buy and Sephora, among others. The rewards you earn from the special offers will be on top of the regular rewards your card already earns.

Also, look for other opportunities to earn cash back through other cash back apps or even in stores. With the Ibotta app, for example, you can score even more cash back when you sign up for offers ahead of time and shop in-person or online. And remember, cash back earned through a portal or cash back app is offered on top of the rewards you get with your credit card.

What not to do when earning a credit card sign-up bonus

John Bergquist, a managing member of Lift Financial, says credit card rewards can be a dangerous game unless you’re disciplined enough to track your spending and pay your bill in full each month with no exceptions. Those with a history of debt may want to just steer clear as a result, as well as anyone who just doesn’t know if they can pay off the balances they charge.

After all, credit card issuers aren’t in the business of giving away money, he says. So, what’s the catch? By and large, credit card company metrics tell them most of their customers won’t be able to pay off their holiday balances and that they’ll ultimately get their money back – plus some – in interest payments.

With this in mind, here’s what you shouldn’t do as you pursue a credit card signup bonus this holiday season.

Chase after rewards

Woroch says far too many people fall into the trap of buying and spending more when they know they’re going to get rewarded for it. However, this can be a waste of time and money if you wind up carrying a balance. Remember that the average credit card interest rate is currently over 16%, and no one is earning that kind of return with a rewards credit card. 

Sign up for too many cards

Pursuing one credit card sign-up bonus may be enough to handle, and you could easily become overwhelmed if you try to turn your holiday shopping bill into multiple new bonuses with a handful of new credit cards. Not only that, but signing up for too many credit cards at once can cause a negative impact on your credit score.

Use 0% APR offers without a plan

Many of the best rewards credit cards also offer an introductory APR on purchases, including cards like the Wells Fargo Active Cash® Card and the Citi Custom Cash℠ Card. However, it’s important to remember that these offers come to an end eventually, at which point you will be stuck paying down the remaining balance at the regular variable APR.

If you decide to pay down your holiday purchases over time due to your card’s introductory APR offer, make sure you have a plan to pay off your holiday shopping bill completely before the offer ends.

Sit on your rewards

Finally, Nitzsche points out that you should redeem your rewards frequently to get the most bang for your buck. Bankrate’s 2021 credit card rewards survey found 31% of respondents had not done anything with their rewards in the last year, putting them in danger of expiring or losing value. This is especially true for airline miles and hotel points, which are frequently devalued as rewards programs change.

Bottom line

Credit card sign-up bonuses can be tempting, but don’t jump in unless you have a handle on your finances and a plan to use plastic responsibly. Only charge what you can afford to pay off each month, and avoid situations where you might be tempted to overspend.

Finally, compare the best credit cards before you sign up for a new one and make sure to only pursue new offers with a minimum spending requirement you can easily reach.

You could earn several hundred extra dollars in rewards this holiday season, but you’ll only benefit if you know which pitfalls to avoid.