Earn Cash by Shopping: The Best Credit Cards for the Holidays

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You’re probably anticipating a lot of shopping this holiday season, and shopping these days usually involves credit cards. You might be tempted to pull out whatever card is in your wallet, but experts says it’s worth your time and money to be just as selective about the credit cards you use as with the gifts you purchase with them.

What’s the best card for you hinges on your spending patterns, said Beverly Harzog, an Atlanta-based independent credit card expert and consumer advocate.

Bill Hardekopf, CEO of Birmingham, Alabama-based LowCards.com, which tracks more than 1,000 credit cards, said they aren’t like the one-size-fits-all wool socks you’re planning to give to your uncle Harry. “There are rewards cards for every hobby, interest or passion you might have,” said Hardekopf, author of “The Credit Card Guidebook.”

“What’s best for you may not be best for me,” he said.

Both experts recommend analyzing your spending patterns from the previous year to determine what card fits you. “Narrow it down to two or three cards, and then look at terms and conditions very carefully, because the cards may have different payouts on different categories or limits on how much you can make,” Hardekopf said.

Harzog likewise urges caution: “Keep in mind that rewards cards, in general, have higher interest rates than other types of credit cards. If you carry a balance, you'll likely negate the rewards you've earned. Pay your balance in full every month and you'll really be able to profit from your rewards card.”

The experts offered their picks for the best cards for the holiday season, depending on whom and what you’re shopping for.

There are rewards cards for every hobby, interest or passion you might have. What’s best for you may not be best for me.

Bill Hardekopf, CEO of LowCards.com and author of “The Credit Card Guidebook”

Cards for the Holiday Traveler

For travelers who need airline flexibility, Harzog recommends taking a look at the Chase Sapphire Preferred Card. If you spend $3,000 within the first three months, you earn 40,000 bonus points, which are worth $500 in travel rewards. You get 2 points per dollar spent on travel and dining, and 1 point per dollar spent on everything else. Also, there are no foreign transaction fees, which can add up if you're traveling overseas. “It's just a really excellent card for someone who travels a lot,” she said.

If you’re traveling on two or four wheels, Harzog favors the PenFed Platinum Rewards Card to save on gasoline. You get 5 points for every dollar spent on gas purchases, 3 points per dollar spent on groceries and 1 point per dollar spent on all other purchases. Through June 30, 2014, you get a variable 9.99 percent annual percentage rate, which is exceptionally low for a rewards card.

Hardekopf’s pick is the American Express Blue Cash Preferred Card, which yields 3 percent back on gas purchases, with no limit. If you spend $1,000 in the first three months, you get an extra $150 back.

When it comes to rewards for all your travel, both experts put the Capital One Venture Rewards card at the top of their lists, because you get 2 points for every $1 spent (vs. the 1 point per $1 spent that is typical with most reward cards) on travel-related purchases, plus the flexibility of using it for most major airlines with no blackout dates. “Plus, if you spend $1,000 in the first three months, you get an extra $100 cash back,” Hardekopf said.

If you are loyal to a particular airline or hotel, branded cards might make sense. Harzog cited Starwood Preferred Guest from American Express as one of the most generous. You get 10,000 points with your first purchase and then 1 point for every $1 spent, and up to 5 points for every purchase made at any Starwood hotel. “You can rack up points in a hurry with all kinds of perks,” advised Harzog, who also likes Marriott’s Preferred card.

Among the airlines’ branded cards, Delta and Continental stand out to Hardekopf for waived baggage fees and lots of perks. Those only make sense, however, if you frequently use those airlines.

Cards for the Hostess

Having guests for the holidays can really bust your budget. The best card for saving on groceries, according to the experts, is the Blue Cash Preferred Card from American Express.

You get 6 percent cash back on purchases at stand-alone supermarkets, but you receive no rewards when shopping at superstores and warehouse stores. You get 3 percent cash back at gas stations and 3 percent cash back on department stores. Finally, you receive 1 percent back on everything else.

"So really, this card allows a hostess to earn rewards on everything from the groceries to the décor," Harzog said.

(Image: Stockbyte/Stockbyte/Getty Images)

Cards for the Shopper

One of the best cash-back cards for saving on everyday expenses is the Chase Freedom Visa, the experts agree. You get 5 percent cash back on up to $1,500 in categories that change every three months. Through the end of December 2012, the 5 percent bonus is available for purchases made at Best Buy and Kohl's, as well as in the categories of hotels and airlines. Once you hit that $1,500, you get 1 percent on everything else you purchase. “This card is a great choice for the holidays,” Harzog said.

You also get a $100 cash-back bonus if you spend $500 within the first three months. That would certainly come in handy either during the holidays or when you get the bills in January.

Although the 10 percent discount frequently offered for purchases made with store cards might tempt you when you’re standing at the checkout with an armload of items, Hardekopf advises that you resist. “In general, the outrageously high APRs on retailers’ credit cards are a significant drawback to them,” he warned.

The Fine Print

Some credit cards -- especially store cards -- offer a 0 percent introductory rate for a period of time, usually from 12 to 18 months. This can seem like a dream come true if you're having problems making ends meet during the holidays, said Beverly Harzog, an Atlanta-based independent credit card expert and consumer advocate.

But there is a catch.

“Be sure you know when the introductory rate ends and when the ‘go-to rate’ begins,” Harzog advised.

The go-to rate is the annual percentage rate you'll have to pay on purchases after the introductory period ends. If you still have a balance at that point, you'll have to start paying interest at the higher go-to rate.

So take advantage of a 0 percent introductory offer only if you know you can pay off the balance before the intro period ends.

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