How to use credit cards to save money and tackle holiday debt

The holidays may be feeling a little different this year. In a tight economy plagued by inflation, it may be hard to give as generously this giving season. Not only that, between the sticker shock at the grocery store and high fuel costs, many Canadians may be dialing down their holiday partying plans or holiday travel.

Though budgets may be stretched thinner this year, you don’t have to compromise on the things that matter – especially if you enter the holiday season with the right tools.

Credit cards may not be the most immediate solution that comes to mind when it comes to saving money. After all, consumer debt is a ballooning issue for Canadians, with 25% of shoppers still paying off last year’s credit card debt. It’s easy to abuse credit and sink into a financial pit if you’re not careful.

However, when used thoughtfully, credit cards can help with a lot of the spendy season’s heavy lifting, offering everything from cashback on popular shopping categories to more breathing room on your debt repayment deadline. With one little piece of plastic, you can ward off fraudsters, forego annoying fees, scoop up exclusive deals, and travel in comfort going home for the holidays.

Here’s how to make the most of common credit card features so you and your family can stay merry and bright.

Minimize your debt

There’s no way around it – every time you tap your card, you are increasing your debt load. Across the country, credit card balances hit an all-time high of $107 billion in the second quarter of this year.

But as contradictory as it sounds, with so many Canadians mired in debt, finding the right credit card becomes all the more important.

If you’re carrying stubborn credit card debt, a balance transfer card can buy you more time while you pay back your balance. Balance transfer cards offer long interest-free periods, and, after that, lower interest rates than standard credit cards. The winner of Best Balance Transfer Card on RATESDOTCA, the CIBC Select Visa offers 10 months of zero interest and an overall interest rate of 13.99% after that.

However, an interest-free grace period is just that – a limited space of time in which you won’t be subject to interest on your credit debt. Your priority should be paying back your balance (and not increasing it) so when that period ends, you won’t be in a bigger hole than you started with.

Cash in on cashback

Cash is king, now more than ever. After all, who wouldn’t want to get a couple of dollars back on the stuff you’re already spending money on? From gas to groceries, entertainment to dining out, there are more ways than ever to get cash back. Cash back cards let cardholders get a few percentages back on their purchases in specific shopping categories.

Some cards offer higher cashback rates on specific fixed categories – say, groceries, or recurring bill payments. Others let their cardholders choose their preferred categories to fit their lives.

Read more: How do cashback rewards work on a credit card?

For example, the Tangerine Money Back Credit Card offers two per cent cashback on two or three categories of the cardholder’s choice (and 0.5% cash back on other purchases). It’s a good time to sign up — their current welcome bonus promo allows new members to get an extra 10% cash back (up to $100 cash back) when they spend $1,000 on everyday purchases for the first two months.

For cash back seekers who earn over $60,000 a year, the Tangerine World Mastercard offers the same cash back rates as the Money Back Credit Card, plus a variety of other perks, including rental car insurance, travel rewards and more.

Plus, if you sign up before December 15, you can get rewarded with $125 cash bonus from RATESDOTCA.

Protect your purchases

The holidays can be a hectic time, with more trips to the mall, more stops to the grocery store on the way home, and more late night online browsing. And these idle transactions invite more scammers. In fact, the fear of fraud is even more powerful around this time — Equifax reported that 44% of shoppers feel more vulnerable to fraud and identity theft during the holidays.

Cautious shoppers should always regularly go over their credit card statements to spot suspicious transactions, avoid unsecured Wi-Fi networks for online shopping, and only buy from retailers they trust. It also doesn’t hurt to have a credit card with a zero-liability policy and purchase protection.

A zero-liability policy is a commonly offered safeguard against scams – if you spot any unauthorized purchases on your credit card, you can be reimbursed in full by your credit card provider.

And if you did authorize a purchase, say on a pair of headphones, and they arrive on your porch damaged, stolen or broken — or broken soon after — Purchase Protection can reimburse or replace that item. Many credit card issuers will also offer their own extended purchase protection, saving you from having to buy an extended warranty on any pricey electronics or appliances at the store.

Related: Guide to avoiding credit card fraud

Sidestep the holiday travel crowds

If you’re planning air travel this holiday season or next year, it’s worth shopping around for a good travel rewards card. To entice new customers, credit card companies offer generous welcome bonuses in the form of enough travel points to cover a domestic flight (or a significant chunk of an international one), airport lounges, supercharged rewards on eligible travel purchases, and/or even the first year’s annual fee waived.

For example, you could get up to $1,149 in first-year value, including a $125 cash bonus from RATESDOTCA, if you sign up for the Scotiabank Gold American Express Card before December 22.

The card combines Amex Experience’s high-flying perks with the flexible rewards of Scotia Scene +. Frequent flyers will also enjoy access to 1,200 airport lounges around the world, a suite of travel-related insurance (trip cancellation, emergency travel medical, lost/stolen baggage — you name it), and no foreign transaction fees.

That should have you cruising in style on the busiest of all travel days.

Shop the market

Even after all this, you may decide that you’re happy with your current credit cards and don’t need another. That’s the dream! In this industry, loyalty gets you everything. Sticking with the same card for a long time benefits your credit score (no unnecessary hard checks!), keeps your budget in check, and allows you to accumulate rewards points over a long period.

And that’s why the first, and best, place to pick up presents might just be your credit card issuer’s in-house shopping portal.

From Amex Offers to RBC Avion, most credit card programs now have their own marketplaces and apps where users can log in, browse goods and experiences, and buy them with points. By putting your points towards your purchases, you can minimize your credit card debt while taking scooping up exclusive deals online safely and securely.

While the points value on merchandise may be lower than that of, say, travel, many of these rewards marketplaces offer revolving discounts at partner retailers, options to transfer points to other rewards programs, and more.

If you’re curious about whether your card has a rewards portal (it probably does), just check out the card’s details on your issuer’s website.

Tap responsibly

With so many credit cards out there, it can be easy to open the first one that catches your eye and start tapping. With all financial products — especially ones that directly impact your credit score — you’re going to want to read the fine print, understand what you’re signing up for, and spend within your budget.

Most importantly, don’t lose sight of your priorities: If your aim is to get out of debt ASAP, go for a balance transfer card. If you want to travel big next year, a travel rewards card will get you part of the way there. And if your main priority is making the most of your holiday shopping and saving a few bucks here and there, a cash back card can be the gift that truly keeps on giving.

Read next: Top 5 credit cards for online shopping this holiday season