Written by Amy Masters
Friday, May 31st, 2019
When it comes to gift giving, there's no need to go overboard on spending. There are ways to make gift giving more feasible for any budget, especially when using your credit card, debit card and loyalty rewards. Here's how I went about gifting outside the box.
How It All Began
Whenever I accumulated enough credit card points or rewards, I was always tempted to redeem them right away, but I was losing sight of the value of these rewards by only redeeming $10-$20 at a time. So I started to save them up and redeem them once a year instead. This gave me a better sense of accomplishment, and made me realize just how effective these rewards can be when it comes time to buying holiday gifts.
I began the process of accumulating my rewards and points about six years ago when I started to gain a better sense of how expensive holiday gift giving can be. Regardless of how many people I needed to shop for, this was my way to make gift giving affordable. At the time, I was actively using a credit card that would earn me points, but I've since switched to a money-back card and continued a similar strategy. Rewards programs and loyalty cards are great, but only when they're used for items you were already budgeting to buy anyway. There are even smartphone apps and websites that allow you to earn rewards on top of the ones you're earning through your payment method or loyalty card.
Rewards as a Budgeting Tool
Here are two strategies I've used while saving my rewards:
1) I directly purchase my gifts using rewards and points. I save up my cash rewards in a savings account to buy holiday gifts, or redeem points for an item at the store.
2) I use the rewards I've accumulated to buy something I've already planned for in my monthly budget. The money I would've normally spent on the item I had already budgeted for can then be re-purposed for buying holiday gifts. For example, if I set aside $50 for groceries or gas every week, I can use the rewards I've accumulated to buy groceries or gas for a few weeks when it gets close to the holidays. That means I've freed up $50 a week that would normally be spent.
Both strategies require starting out early in the year so that when it comes time to shop for gifts, you've accumulated enough rewards and points to redeem. If there isn't a lot of time from now until when you'll be shopping for gifts, don't stress – there are still ways to buy gifts on a tight budget.
Switching Cards to Maximize Your Rewards
Credit cards aren't for everyone, so stick with the card types that make you the most financially responsible. The best success I've had with my two strategies involved using a credit card, but you can still reap benefits from a debit card or loyalty card rewards. Just remember that even though switching your current card strategy to maximize the results isn't a bad thing, it's always a good idea to consider the credit implications and the credit card options.
Know the Redemption Limitations
Not all credit cards, debit cards, or loyalty cards are made the same. There are different thresholds, criteria, and frequencies for redemption. Knowing the redemption limitations can help you identify the best way to integrate the spending of your rewards into your budget.
When used with a specific goal in mind, these cards can be a great way to avoid using the money you earn from your employer or side jobs for your gift purchase(s). Consider integrating your rewards into your savings strategy, whether to fund your vacation, your holiday gifts, or another big purchase.