How to keep your credit card spending in check and maximise rewards this holiday season

Many banks and merchants provide seasonal benefits on credit cards, such as discounts on travel bookings, dining experiences, and entertainment.

As the year draws to a close, many people find themselves grappling with financial challenges. That’s because the long holiday coupled with the festive spirit leads to increased credit card spending on gifts, travel, and other year-end expenses. However, a well-thought-out strategy can aid in checking overspending, managing debt, and handling finances wisely.

Here are some tips to help you draw a good balance between leisure spending and financial prudence while using your credit card this holiday season.

Understand your financial position

Before you dive into year-end shopping and holiday spending, it's essential to first assess your current financial health. It is important to understand your credit card balance, credit limit, credit score and available funds to repay the credit card bill. “Review your recent spending patterns to determine whether you have room for additional expenses. If your credit card balance is high, prioritise clearing it to avoid overdue charges,” says a spokesperson from Mastercard.

Create a holiday spending plan

A key element of financial discipline during the holiday season is having a clear spending plan. Start by listing your potential purchases, including gifts, travel and lifestyle expenses and other holiday-related costs. Once you’ve identified these expenses, divide them into essential and leisure categories. “Set a maximum spending limit that takes both your immediate financial needs and long-term goals into account,” says the Mastercard spokesperson. Setting a spending limit ensures you stay within your means while making the most of your holiday.

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Maximise credit card rewards

One of the main advantages of using a credit card is the opportunity to earn rewards. During the holiday season, credit cards often roll out offers on specific categories, such as travel, shopping, and dining. “To maximise your rewards, ensure that you select a credit card that aligns with your year-end spending plans,” says Harshil Morjaria, a certified financial planner at ValueCurve Financial Solutions. For instance, if you’re planning to travel, use a card that offers extra points on airfare or hotel bookings. Another strategy is to concentrate your spending on one or two cards to accumulate points quickly. For example, if one card offers 5 percent cashback on gifts and 2 percent on other purchases, make sure to use it for all your holiday shopping to take advantage of the higher cashback rate.

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Access offers and deals

The holiday season is brimming with opportunities to access special deals, discounts, and exclusive offers from credit card issuers. Many banks and merchants provide seasonal benefits on credit cards, such as discounts on travel bookings, dining experiences, and entertainment. “To ensure you don’t miss out, make sure you activate these offers on your card,” says Morjaria. Moreover, shopping online through a credit card often provides instant discounts, cashback and bonus points.

Implement card controls

As spending tends to spike during the holiday season, it’s crucial to maintain control over your credit card usage. One of the best ways to prevent overspending is by setting transaction alerts. “These notifications can help you track your expenses in real time and ensure that you are staying within your budget,” says the Mastercard spokesperson. Additionally, consider using your temporary card freeze feature to avoid impulsive purchases. Another useful strategy is to set daily or weekly spending limits.

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Leverage personal finance management tools

Many banks and financial institutions now offer apps with budgeting and personal finance management features. These tools can help you track spending, set financial goals, and monitor your credit card balance in real time. By using these apps, you can reflect on your spending patterns and adjust your financial strategy as needed.

Don’t forget the due dates

It’s important to stay on top of your credit card bills to avoid late payment charges and interest. Set reminders for payment due dates to ensure timely payments. “Missed payments can lead to penalties and negatively impact your credit score, which can affect your future borrowing power,” says Morjaria.  “Equally important is managing your credit utilisation ratio, which plays a key role in maintaining a healthy credit score. Try to keep your balance below 30 percent of your credit limit to avoid an impact on your credit score,” the Mastercard spokesperson adds.

The year-end period presents both challenges and opportunities. By following a structured approach that includes assessing your financial position, planning your holiday spending, maximising credit card rewards, and utilising budgeting tools, you can enjoy the season without falling into debt. So, take control of your spending, keep an eye on your financial goals, and make the most of this holiday season.