How to pile up rewards points this season
Credit card issuers and stores are offering special rewards programs for the holidays.
During November and December, consumers are expected to buy $447 billion worth of holiday gifts. That's a 2.3% increase over last year and, if each dollar generates a single rewards point, enough to cover more than 17 million free plane tickets, $28 million in cash back or a whopping $4.4 billion in store credit.
This holiday season, stores and credit card issuers have rolled out temporary reward bonus programs that, in concert, can generate meaningful savings. Some credit card companies have increased their cash back or rewards points bonuses, some stores have increased the benefits of their loyalty programs by threefold, and more consumers are shopping via popular rewards portals (like an online shopping mall) to earn even more rewards.
Combined, that can mean big savings. For example, buying $250 worth of gadgets at Best Buy would yield a $5 store certificate for a future purchase, $12.50 from a Citi Dividend Platinum Select card (which offers a 5% bonus on electronics stores through December) and an extra $2.50 through a reward portal such as Ebates.com. Net discount: 8%.
For stores, sweetening reward programs is a way to stand out from competitors, says Kelly Hlavinka, a managing partner for market research firm Colloquy. Amid a toy price war with Wal-Mart and Target, Toys R Us announced last month that it would offer 10% back on holiday purchases, up to $50 in rebates, to members of its free loyalty program. That's triple its usual offer of $5 for every $150 spent.
More cash back
Credit card issuers, scared by predictions of lackluster holiday spending and more people using cash, are hoping to use the offers to sway more consumers into picking plastic in general (and their card in particular). Discover, for example, is doubling the cash-back rate on its cards to 2% for up to $1,000 in purchases made though Dec. 31.
The promotions work: Of consumers who plan to pay by credit, one in four says it's solely for the rewards, according to a survey from USAA. Issuers "feel like they've got to get your attention," says Curtis Arnold, the founder of CardRatings.com.
Of course, earning rewards points on a credit card is never worthwhile if you carry a balance. Points or miles are worth about a penny each, and just one month's interest can easily eclipse that value.
Even if you don't carry a balance, this isn't instant gratification: It takes most programs a month to process rewards earned, a turnaround that's too tight to redeem rewards for holiday gifts. But strategic spending can help offset other expenses for 2011.
Here's how to do it:
Use a reward portal. If you plan to shop online, use a rewards program that offers points for using its site as a starting point to link to your favorite retailers. Most credit card issuers, airlines and hotels have their own, as do a handful of retailers. There are also independent portals including Ebates, SwagBucks and MyPoints.
The catch: Sometimes you can't earn points but you can use a coupon code with your purchase, Arnold says, so consider whether, say, the $5 discount or three reward points per dollar spent is more valuable before buying.
Consolidate spending. The average household participates in 11 loyalty programs, according to Colloquy. Any time you can combine them, you should. For example, use an online reward portal that deposits points into the same account where your credit card rewards go. You'll earn more rewards and be able to redeem them faster, says Chris Barnard, president of reward-exchange site Points.com.
Check each to see where you stand on accumulated rewards. Pick one where you're close to a reward or that offers the most back in categories where you plan to make purchases.
Collect box tops. If a store or a product you like offers a free loyalty program, it doesn't hurt to sign up. (The calculus is a little different if you have to pay to participate.)
In the six months since her daughter was born, Stephanie Posa of Manahawkin, N.J., bought enough Pampers to cash in the product's loyalty codes for more than $35 worth of photo calendars, books and prints. "Those calendars are $18. That's a pack of diapers, right there," says Posa, who plans to give them as gifts to her in-laws and parents.
Earning these rewards -- like all loyalty programs -- does mean you're giving stores more ways to track your spending and behavior, but that didn't bother Posa. She stuck with the program because it's easy -- the family is buying plenty of diapers, after all.
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