It's challenging to budget during the holidays, what with shopping, entertaining and family travel on the agenda. No wonder many of us look to our reward points for a little help.
Gifts are top priority for most people this time of year. According to Capital One's quarterly Rewards Barometer survey, 59 percent of holiday budgets go for gifts, followed by meals (20 percent). Gift cards are among the most popular redemption options, along with cash and domestic airline tickets. Travel accounts for only 11 percent of the average holiday budget, but if you have a card that earns travel rewards, using them now is a great way to save some cash for gifts.
So, how do you get the best return on your holiday points?
Take advantage of Cyber Monday. About 43 percent of rewards cardholders will skip the trip to the store on Black Friday this year, the survey showed. Thirty-two percent plan to shop online instead, a third more than last year. Many retailers offer special discounts on Cyber Monday, which is Dec. 2 this year.
If you're one of those planning to skip the long lines at crack of dawn, check out CyberMonday.com. It has a listing of 800 online retailers and the limited-time deals they're offering. You can use that information to gauge whether it's a better deal to pay outright for an item or use rewards to purchase it, and if it's the latter, how many points represent a fair exchange.
Register for revolving categories. Rewards cards that offer 5 percent discounts for revolving categories are aimed at holiday spending right now, mainly retail purchases. Now through Dec. 31, Discover Cashback is offering a 5 percent bonus in online shopping -- apparel, electronics, toys, gifts -- while Chase Freedom cardholders can earn 5 percent cash back on up to $1,500 spent at Amazon.com (including on Amazon Prime memberships) and department stores such as JC Penney, Macy's and Sears. Shop through the Ultimate Rewards portal with your Chase Freedom card and you'll get an extra 5 percent back, for a potential total of 10 percent cash back.
Double-dip with gift cards. Discounted gift cards are a great way to give someone more spending power than you're paying for. American Express and Capital One are offering holiday deals of 10 percent to 20 percent off on select gift cards purchased through their rewards websites, and Discover promises to increase "or even double" your cash back rewards with gift cards from more than 150 partners, including retailers, gas stations and restaurants. Chase Freedom is also offering deals on gift cards through the end of the year.
If you want to maximize return on your gift card investment, consider buying discounted gift cards and then using them to buy gifts. For example, 2,250 Ultimate Rewards points would normally be worth $22.50 in cash, but if you use them instead to get a $25 Kohl's gift card, you're getting a 10 percent savings. If you then use that gift card to buy merchandise on a 10 percent-off sale, you've shaved 20 percent off your purchase price.
Shop through a rewards portal. The easiest way to get an extra payoff is to remember to start your online shopping at the portal of your rewards program -- the site often referred to as "the mall." Shopping through a rewards portal may not save you money during the holidays, but you can bank some rewards for later, when you're really tapped out.
The biggest missed opportunity by cardholders, says Jennifer Roberts, president of affluent and high net worth business at Chase, is buying directly from online retailers instead of going through the Ultimate Rewards portal. "When customers shop online and not through the mall, they're effectively missing out on their incremental earn," says Roberts. "They may be shopping some of the merchants we offer and we can see those transactions come through, but we don't see them coming through our mall. So, a lot of times they're missing out on up to 10x incremental earn in terms of points."
Use a third-party tracker. If you have points and miles spread out over several programs, you can compare the payoff for a particular purchase with a site such as evreward. Type in the e-commerce site you're about to buy from and it will show you which rewards programs are offering bonus points for that retailer. Evreward tracks more than 40,000 rewards and coupons for more than 10,000 online retailers and services, and allows you to compare deals at a glance.
Book holiday travel through a rewards portal. If you are planning to travel during the holidays, travel rewards often offer the best bang for your point. For example, if you transfer your Chase Ultimate Rewards points to your United Mileage Plus account, you could get a round-trip United flight from New York LaGuardia to Los Angeles for 50,000 points (departing Dec. 20 and returning on the 28th). That same flight costs nearly $800 if you buy it with cash, making the travel reward a much better deal than if you used those 50,000 points on, say, the $500 TV being offered through Ultimate Rewards.
The same principle holds true for other programs such as American Express Membership Rewards.
Dig up forgotten points. Spokespeople from both American Express and Capital One say the most common mistake cardholders make with rewards is not redeeming them. "Customers are most likely to remember to use the rewards on the card they use the most," says Amy Lenander, vice president of rewards programs at Capital One. "But they probably have rewards sitting around in places they don't remember that they can get some utility from at this time of year -- either to buy gifts or to supplement some of the travel they're doing."
Keep it simple. Life can get crazy this time of year and some consumers prefer to avoid the hassle of juggling multiple reward programs. If this describes you, it might make sense to pick one card and focus your efforts. "I think it's important for customers to understand which of their cards gives them the most value all the time," says Lenander. "If you focus on one card, you're able to build up a larger pool of rewards that you can then you can use for bigger purchases, bigger rewards redemptions."
If you opt for simplicity, make sure you have a card that offers rich rewards on the things you're most likely to spend money on, and lots of flexibility to use them when and how you want to. Avoid rewards that expire or come with blackout dates.
Give to charity. While most of us focus our spending on one main card, we often leave points stagnating in less-used loyalty programs. What to do with the about-to-expire 4,000 miles on that airline you rarely fly? If giving back is one of your priorities this time of year, you can always donate those points to charity. Most major card issuers and loyalty programs make that fairly easy to do, with a minimum donation of 1,000 miles.See related: Best ways to earn final points that get you a free flight, 7 ways to prep for a lean holiday season, 3 ways to curb pre-holiday money stress