The holiday shopping season is upon us, and that means you're probably about to spend a whole lot of money: According to the National Retail Federation, the average American will spend about $738 on gifts, decorations and other holiday purchases. And, actually, that's down 2 percent from last year, so perhaps we're all trying to be a hair more frugal.
But another way to save on those holiday outlays can be to pick the right card when you get to the checkout counter. So which one should you use?
If you're planning on carrying a balance into 2014, the answer is obvious: Whichever card has the lowest rate. But if you're planning on paying off your purchases in full and APRs aren't a concern, then you'll need to consider what ancillary benefits you can get by choosing one card over another.
The Rewards Carousel
The biggest consideration here is what sort of cash-back rewards you can get out of your card. Usually, you get only 1 percent back, which is a drop in the shopping bucket. But many cards have 5 percent bonus categories that rotate on a quarterly basis. And the good news is that credit-card issuers tend to pick bonus categories for the fourth quarter that line up nicely with where you're likely to spend money for the holidays.
Take the Chase (JPM) Freedom card, for instance: This quarter, you can get 5 percent cash-back at Amazon.com (AMZN) and department stores including J.C. Penney (JCP), Sears (SHLD) and Nordstrom. The bad news is that some of the retailers with the lowest prices, including Target (TGT), Walmart (WMT) and warehouse-club stores, are excluded from the deal. Still, if you drop $300 between Macy's and Amazon this holiday season, you're getting back $15 just by using your Freedom card.
%VIRTUAL-article-sponsoredlinks%If you intend to do most of your shopping online, your best bet might be the Discover (DFS) It card, which provides 5 percent cash-back on all online purchases through the end of the year.
"As people do more holiday spending online, this is a great benefit," says Ben Woolsey of CreditCards.com. "It's only for the first $1,500 of spending, but most people are spending less than that."
Finally, there's the American Express (AXP) Blue Cash Preferred card. It, too, offers bonus cash-back at department stores -- but it's only 3 percent, not the 5 percent you get from the Chase Freedom. And unlike Chase Freedom, it has a $75 annual fee.
But the department store cash-back is year-round, so you can still take advantage of it in January if you didn't like any of the clothes you got for Christmas. Plus, that cash-back category isn't capped at $1,500 like most rotating-category cards, so it's a good option for big spenders.
Purchase Protection (and Other Big Benefits)
Plus, that $75 fee also pays for some other benefits that could make it a great option for holiday shopping. American Express cards offer a variety of insurance options on your big gift purchases.
"AmEx cards have an extended warranty, which covers up to a year's additional warranty [on your purchase]," says Erik Larson of NextAdvisor, which reviews credit cards and other service. Larson notes that American Express cards also have return protection, meaning that if the store won't take your purchase back, you have up to 90 days to "return" it to American Express and get up to $300 refunded. And there's also purchase protection, which will cover up to $1,000 in damage or theft to your product within 90 days of purchase. So if you're buying a pricier gift like a laptop or TV, you may want to use an American Express card in case anything goes awry.
American Express isn't alone in offering such added insurance: MasterCard (MA) credit cards and Visa (V) Signature cards offer similar benefits. And if you buy something with your Citi (C) card and then find it at least $25 cheaper within the next 60 days, the Citi Price Rewind program will refund you the difference.
Bonus Rewards Portals
If 5 percent cash-back isn't good enough for you, some issuers will give you an extra perk if you do your online shopping via their websites.
Take Discover's ShopDiscover program. When you shop through the site, you'll get a cash-back bonus of 5 to 20 percent, and select retailers are increasing their bonuses for the holiday season; Nordstrom and Sears, for instance, are each offering an extra 10 percent bonus, and that's on top of the 5 percent cash-back you're getting for shopping online with the Discover It card. That means that a $500 purchase at Nordstrom made through the ShopDiscover platform will net you $75 in cash-back. That's huge.
Discover isn't alone in offering this sort of program -- Chase lets you earn extra rewards when you shop through its Ultimate Rewards portal, netting you a total of 15 percent cash-back at Kohl's, for instance. Before you buy anything online, check to see if your own credit card issuer has any sort of bonus rewards portal that could allow you to drastically increase your cash-back.
"If your card has one of these online malls, it might be a good idea to check, because they do have a lot of popular stores," says Larson.
A final word of advice: If these sorts of perks sound good to you, and you think you've got a good enough credit score to qualify, you may want to put in an application now. Black Friday is three weeks away, and it could very well take that long for you to get approved and find your card in the mail. You don't want to miss out on the sweet rewards because you took too long to get the right credit card in your wallet.
Matt Brownell is the consumer and retail reporter for DailyFinance. You can reach him at Matt.Brownell@teamaol.com, and follow him on Twitter at @Brownellorama.