Smart Money Podcast: How to Maximize Rewards on Big Credit Card Purchases

Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:

Get tips for saving money on Halloween costumes and decorations, plus how to leverage credit cards when making big purchases.

How can you use credit cards to maximize rewards when making big purchases? What are some ways to save money on Halloween costumes? Hosts Sean Pyles and Elizabeth Ayoola discuss saving money on Halloween costumes and decorations to help you understand how to be festive without breaking the bank. They begin with a discussion of Halloween budgeting, with tips and tricks on DIY costume ideas, using cashback apps, and repurposing items you already have.

Then, Personal Finance Nerd Kim Palmer joins Sean and Elizabeth to discuss the best ways to use credit cards for major expenses. They discuss how to earn rewards while minimizing interest, ways to protect your credit score, and how to make use of a health savings account (HSA) for medical-related purchases.

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This transcript was generated from podcast audio by an AI tool.

Spooky season is upon us, but I’ve got to say, this year has felt pretty spooky as a whole. So much uncertainty, so many highs and lows. But that said, roll on my favorite half of the year and all the festive seasons and cooler weather. Sean, has this year felt spooky for you, and are you ready for Halloween?

This year hasn’t felt too spooky for me, but I am always ready for Halloween, Elizabeth. I love myself a good scary movie and a costume party, so I say bring on the ghoulies.

Welcome to NerdWallet’s Smart Money podcast. I’m Sean Pyles.

And I’m Elizabeth Ayoola.

This episode, we answer a listener’s question about when and how to use credit cards for big purchases. But first, Elizabeth and I are going to chat about some of our favorite ways to save money around Halloween.

Those who celebrate Halloween may have already gotten their costumes—shout out to y’all for being early—and others, inserting myself, might be late to the party. If you fall into the latter, pump up the volume, because we’re going to be sharing a few cost-saving tips when it comes to costumes. I also came across this statistic from the National Retail Federation that says in 2024, Americans are expected to spend about $104 on Halloween.

That might sound like a lot of money, but depending on the year, it sounds about right for me. Between costumes and parties and haunted houses, it’s really easy to spend a lot of money on spooky stuff and get caught up in the festivities. Elizabeth, I bet that you drop a decent amount of cash each Halloween, especially having a little one in the house.

Well, this year, my son said he wanted to be Sonic again, but he outgrew last year’s costume, since he seems to be growing an inch every five to 10 business days. I’m sure all the parents out there can relate. While I’m not a huge Halloween person and I don’t decorate or buy a costume for myself, I do like my son to participate, so maybe in some ways, I’m vicariously living through him, since I wasn’t allowed to celebrate growing up because of religious reasons. But anyways, the idea popped in my head to DIY a costume for him, and also make an effort for myself this year. And then, another light bulb moment came for me, and I thought, how can I save money on costumes as a whole?

Sean, are you mindful of how much you spend? How much have you spent on costumes in the past? Tell us.

I do try to be mindful of how much I spend, but sometimes, like I mentioned before, I can get caught up in the moment. Some years, I piece together my costumes from whatever I have around the house, and other years, I go all out on a really elaborate character. But Elizabeth, I’m wondering if you can help us figure out how to spend less this year, especially folks who are getting their stuff together last minute, just want convenience because they do not have a lot of time.

I’m going to answer that, Sean, but I do want to bookmark that I want to hear more about these elaborate costumes later, okay?

I’m going to talk about them in a bit, so just you wait.

Alright. So I think the most important thing is to be honest about what you can afford, and budget, to start with. What that looks like is looking at your disposable income, and then deciding how much you can allocate to costumes. I know if you’re a diehard Halloween fan, the desire to do an elaborate and expensive costume may tempt you to say YOLO. But I’m going to be a little bit of a joy-kill and remind you that Thanksgiving, Christmas, and New Year’s are fast approaching, assuming you celebrate those three, so you might want to reel back the spending and budget.

Speaking of budgeting, when shopping for a costume, I would say don’t forget to do some price comparisons and make sure that you are getting the best deal. I always love perusing the wild costumes at places like Spirit Halloween, but there’s definitely a surcharge for shopping there, and nothing feels worse than buying something and then realizing that you could have gotten it cheaper somewhere else.

A cheeky plus, we have a list of cash-back apps on nerdwallet.com that you can use while you’re shopping. So for those who don’t know what a cash-back app is, it gives you a rebate on your purchases, or a coupon so that you can get an additional discount. Now, some apps will give you points that can be redeemed as a price break on other purchases, or they’ll give you cash instead. And also, some cash-back apps work both at the store and online.

Now that we’ve gotten the budget out of the way, a tip that comes to mind for me is doing a DIY costume, like you mentioned before, Sean. This is my favorite tip personally, because my inner creative starts raging, of course in the best way possible. Now, I’m taking on the task this year of spending, guess how many dollars? $0 on a costume. And you want to know how I’m going to do that? I’m going to use all those items around my house that I never touched this year.

I was thinking, first of all, nobody asked, but I’m telling you anyway, that I wanted to be a stylish mummy, but y’all, I don’t know if that’s a good idea because there’s a toilet paper shortage in Houston, but I still might do it anyway. Thinking of being a stylish mummy, because all I really need for that is toilet paper. I was going to use a flat sheet. I never use flat sheets, unpopular opinion. A second costume idea I had was to be the Whitney Houston. I have all the items from her iconic look in the Dance With Me video, so I was like, okay, I can do that-

… for free. Very cute, right? The big hair-

… the leather jacket, the white shirt.

Perfect. And last but not least, I thought maybe I could be a rainbow.

Sean, tell us, have you done a DIY costume before? The people want to know what you’ve done.

I have done so many DIY costumes before, some better executed than others. But last year, I have to say, I made my best costume to date. My partner and I went as a couple of fruits for Halloween, and it was really affordable and it was a fun punny costume. I was a bunch of grapes, so I just blew up a bunch of green balloons and I made a headband with felt as some grape leaves, and the whole thing cost me probably $15, if that. I think the most expensive part was the felt that I ended up needing a lot more of than I originally anticipated, but I just got that from Michaels and it was pretty cheap. I will say I think a pitfall to avoid with DIY costumes is spending more than you would on a ready-made one, because, Elizabeth, I’m sure you know, it can be really easy to run wild and just start buying everything you think you might need, and then suddenly you have a $100 DIY costume on your hands.

Oh, I know, and that’s just because I do arts and crafts, and I have no decorum when I go into the arts and crafts shop. I also wanted to tell you, Sean, that I think you have a Halloween twin out there somewhere.

I saw this viral video of a baby grape for Halloween. Yeah, and this kid basically would put balls from their ball pit inside of their onesie just for fun, and the amazing mom was like, oh, wait, you look like a baby grape, and then actually made the baby a baby grape for Halloween. So there you go.

That’s so cute. That actually sounds more practical than mine, because I could not sit down all night because of all of the balloons that I was covered in. That baby was just laying there covered in little balls, how handy, love that.

I know, right? But I’m sure you got some good pics, so it’s all good.

But seriously, Sean, I think the key with DIY is using as many things from around the house as you can. Also, a mom I interviewed for an article I wrote on this topic for NerdWallet did say that you should not see it as a waste of money if you do end up spending a bit more, especially for parents, because your kids can wear the costume throughout the year, assuming that they’re young. And I agree with her on that one, I will say that the Sonic costume that I got my son last year for Halloween got a good wear, and he wore that thing to sleep, he wore it out sometimes, he wore that costume everywhere.

I love how kids will just wear a Halloween costume whenever they want, any time of the year, it’s so adorable to me.

I’m a little jealous. I wish I could just wear my grape costume any day I want.

Unfortunately, you might become a viral moment if you do that, Sean, sorry.

Yeah, yeah, I’d be publicly shamed on the internet. Well, that does make me think of another tip though, choosing costumes that can be repurposed, and that could mean mixing and matching different items. For example, a cape can be used for multiple costumes, or a leotard can be really flexible. Each year, maybe you can only then get accessories to add onto what you already have. For example, I have a trunk full of costume materials that I’ve accumulated over the years, and I can just pull from it whenever I’m in a pinch for something fun to wear.

I love that so much. That makes me think that maybe I shouldn’t have tossed my witch hat from last year. I gave it to the charity shop. But that is a good segue for saving money by going to thrift stores, and using items in a thrift store to create a DIY costume, or to buy ready-made ones for less.

Oh, for sure. And platforms like OfferUp and Facebook Marketplace are really good too. But before you go home with this item or exchange money for it, make sure it’s actually in fine shape and maybe as clean as you would hope it would be.

Exactly. And I think with that said, sometimes you can’t see in person, so make sure you check for the return policy as well if you’re going to buy second hand.

A final tip that comes to mind is not needing everything to be perfect and coordinated. For larger families, they may especially consider not doing the whole matching costume thing, because let’s just do a bit of quick math, let’s say you have a family of five and you’re buying five costumes that cost $40 each, that’s $200 on something that you might never wear again. The same perfectionism thing goes for DIY costumes. It’s easy to end up overspending when you keep redoing or expanding the costume to try to make it perfect. You’ve got to remember that Halloween is about having fun, and it’s only going to last for a few hours.

Totally. So we’ve given a lot of tips about costumes specifically, but I want to throw in one tip about decorating, because I do love to throw a good Halloween party, and any successful Halloween party is all about the production value. In this case, dollar stores are a great resource for Halloween decor. We threw a Halloween party last year, and I got tons of spooky chains and fake skeletons and cobwebs from the dollar store. It would’ve been much more expensive had I gone to Spirit Halloween. So really hit up that dollar store if you want some fun, affordable stuff. You can also make your own crafts pretty cheap too. I made these disco skulls by adhering mirrored tiles to skulls that I bought from a craft store, and they looked pretty fabulous, if I can say so myself.

Sean, you’re so creative with the costumes, I love it. And because of that, I’m going to be expecting some pictures from your costume this year, okay?

Unfortunately, I’m going to be so boring for Halloween this year and do nothing, because I’m taking my CFP exam the following week. A good spooky movie and a bowl of popcorn is going to be my Halloween costume.

Fine, I’ll take it. Still more creative than what I’ve come up with, so I’ll take it.

Well, I want to see your pics too, okay, Elizabeth?

Okay, I’m going to share, I’m going to share the Whitney Houston look, I think I’m going with that one.

All right, okay. And one more bonus tip, if you have no idea how much you usually spend around Halloween, consider using a budgeting app. That’s something you might want to try to consider anyway as we get closer to the holidays. NerdWallet has a great list of the best budgeting apps that you can use right now, and we will link to that in today’s show notes.

Enough about Halloween, now let’s get on to this episode’s money questions segment with our co-host, Sara Rathner. That’s coming up in a moment, stay with us.

We’re back and answering your real-world questions to help you make smarter decisions about your money. This episode’s question comes from a listener’s text message. Here it is. “Hi, Nerds. I have a question. I’m going to be freezing my eggs soon, a procedure that can cost over $10,000 in New York where I live. I have to pay out of pocket, and I’m wondering the best way to pay for this to maximize either credit card points or any other benefits. I have enough to pay cash, but should I pay with a card to get the points, or is it such a big expense that it’ll hurt my credit? I also will put some of it on my HSA card, pre-tax dollars, but I don’t have enough in my HSA to cover it all.”

To help us answer this listener’s question, on this episode of the podcast, we are joined by personal finance Nerd and host of the NerdWallet book club series, Kim Palmer. Kim, welcome back to Smart Money.

Thank you so much for having me.

Let’s talk about using a credit card to cover a big planned expense. How should listeners think about which card might be the best to use?

Well, there are definitely a few different things to think about here, and I think our listener is really on the right track with considering using the cash that she already has to pay for it, but using a credit card so you’re actually paying off the balance in full with that cash, and that way, you’re kind of getting the best of both worlds, where you can earn rewards through that credit card purchase, but at the same time, you’re avoiding any interest or fees because you’re going to use your cash to pay off that credit card in full before it’s due.

And that’s a really good point, because if you aren’t able to pay off a $10,000 expense like this, the interest that you would pay on a credit card is likely going to be much more expensive than you would pay for something like a personal loan, given how expensive most credit cards are right now. People also might want to think about taking out a personal loan or a zero APR credit card if they do want to finance something like this too.

Absolutely. And I think our listener is really on the right track too, just thinking about the overall credit limit and how much you might be using up by such a big purchase like this, because it can impact your credit score, and thinking about that is important. It’s worth looking at what is your overall credit limit right now across all of your cards, how much of this purchase will it eat up? Because as a rule of thumb, we like to stay below about 30% of your overall credit limit in terms of your usage. And so, considering that is also a good thing to think about ahead of time.

And you mentioned, Kim, paying off the balance, not even just as soon as it’s due, but even before it’s due, and that’s important to note, because when you’re putting these super large charges on your credit card, you don’t have to pay when the due date hits, you can pay early. Not only does that get that giant to-do list item off of your list and out of your head, but it can also help lower your credit utilization too, right?

It can, and I’m really glad you brought this up. I actually experienced this personally myself too when I had another big expensive purchase, as we were doing some home construction, and my credit limit was really eaten up every time I had to pay those big bills for the home construction. It made me nervous, because not only was I using up so much of my credit limit, but what if I had another big expense that came in? I didn’t want my credit card to be turned down and rejected. So basically, I paid early, so I paid as I took on those costs throughout the month as I could, and that way, I still kept my overall credit limit down. So you don’t have to wait till the end of the month to pay.

The nice thing about credit utilization and your credit score is that the relationship is pretty elastic, is that when you use your credit limit, maybe you are making a $10,000 purchase, or it’s something even smaller, that will use up some of your utilization, and that can lower your score temporarily. But the moment you’re paying off your balance, it’ll go right back to where it was, most likely.

Yes, it is resilient, so that is the great thing about it.

What about something like rewards for a big purchase like this? We know people are going to try to get as many points as possible when they’re making a big purchase.

Yes. I’m so glad our listener is thinking about that, because really planning in advance can just make sure you’re getting as much out of it as possible. So you want to think about what are you looking for for your credit rewards. Are you planning a big trip? If so, do you want to use a travel credit card that’s in your wallet to get those travel rewards? Are you looking to get cash back? If so, maybe you want to use a cash back card. You might even want to consider applying for a new card if you want to get a sign-up bonus as well, especially if you are planning a big trip or something really important to you down the road. So planning in advance is the key here, and just thinking about what kind of rewards do you want to make sure you’re earning from such a big purchase.

Kim, you mentioned a sign-up bonus. That’s definitely something that’s really appealing potentially, because our listener is looking at a purchase of over $10,000. It’s not a small sum of money. And usually, with sign-up bonuses, you have to spend a lot of money to get some money back. So how should they think about potentially using this purchase, this expense, to get sign-up bonuses, and not just some cash back or some travel points?

Well, a sign-up bonus is a chance to earn some extra rewards, and usually you have a limited timeframe to do it, a few months, for example. And so, this big purchase is such a good chance to get that sign-up bonus, earn the minimum amount you need in order to get it. And if you are planning for something like a big trip that you want to use your points for, you want to make sure you have enough time to not only accrue these points, but then also time to purchase your plane ticket or hotel or whatever it is that you want to use the points for. We recommend, in general, you want to have at least five months or so in order to make sure you can earn all those rewards in time. If you have a big trip coming up, make sure you’re giving yourself enough time to take out that card, earn the sign-up bonus, and then book your trip with the rewards that you’ve earned. Sara, I know you have a lot of experience earning sign-up bonuses as well, you’re a pro at it.

Every time we have a big planned expense, it’s a time to think, is it time to apply for a new credit card? And the listener’s talking about freezing their eggs, which hopefully means one day they will have a baby, I will warn you that, depending on your health insurance, you might be out a couple of grand out of pocket when you give birth from the hospital bills. My childbirth was enough to earn two sign-up bonuses. Thanks, America. We eventually treated ourselves to a trip to Spain. At least some of those points covered about $3,500 worth of hotels.

And so, that was a nice way to get about half of what we spent back.

You definitely earned it.

I earned it, okay? Man, that recovery was no joke.

What I really like about our listener’s situation and their planning and this opportunity for a sign-up bonus is that they know what their expense is, because sometimes when people take out a new credit card that has a lucrative signing bonus, it can be tempting to just buy random things that you don’t need and honestly might even have a hard time paying off, but this listener has the cash on hand, they know what they’re going to be spending their money on, and that, in some ways, is the ideal way to get a sign-up bonus for a new card.

It’s all about planning, and I think the fact that this listener is thinking about it in advance, knows the expenses, can estimate those future payments, it goes a long way just to making sure you’re getting as much out of this purchase as possible.

Sara, you mentioned that you have used credit cards in this way to get some good sign-up bonuses. Kim, I’d love to hear if you have any similar experiences of having a planned expense like this and using your credit cards to make the most of it.

Absolutely. So I mentioned before briefly about my home renovation and how we put that on a credit card, and I did pay it off as we went just to avoid getting so high with my credit limit usage. And then, when the renovation was finally over, we had earned rewards, because we had put so much of it on the credit card, we actually used that to fund a spring break trip down to Florida.

It was a big reward after all of that work. So it wasn’t a sign-up bonus, because we had already used that on a previous trip, but still, just the rewards themselves really paid off.

My partner had a similar experience where we were renovating our bathroom here, and as you guys know well, managing a house, renovating a house, is very, very expensive. So he took out one of those credit cards that has a zero APR promotional period, where he can pay it off over 18 months or so. He put a good chunk of change from the renovation on that credit card, and has been able to pay it off gradually, which, for many people, might be a more feasible route than just throwing a chunk of cash at your balance all at one time.

Yeah. Those 0% APR promotions are not only helpful for planned expenses, but if you can qualify for a card and you have an unplanned expense, let’s say something major in your home breaks, like your air conditioner, and you need to replace it, that’s another way to spread the pain of payments out over many months, because if it’s an unplanned expense, you might drain your emergency fund, and then you still need to continue paying for that cost. So this way, you could spread it out and not drain additional savings that you have in addition to your emergency savings.

Right. And when we talk about debt being a tool that people can deploy when they need to, this is really what we’re talking about. At its best, you are intentionally saying, “Hey, I will take on some debt. I know pretty much how I’m going to be paying it off over time.” And Kim, to your point earlier, you’re making a plan for it. But it can help you preserve liquidity, because sometimes cash is the best thing you can have on hand to cover other expenses, like some contractors or other people may not accept a credit card, so you really do need to retain a certain amount of cash at all times if possible.

Yes. And I think we’ve already touched on this as well, but just thinking about paying off the amount that you owe on your credit card early or in chunks, I think it can also help you with your overall cash management and outflow, because it can be really stressful if suddenly all of your bills are hitting at once, you have a whole bunch due at the end of the month. And so that can be another reason just to spread out your payments, pay some of the credit card, it doesn’t even have to be all of it, just pay off a chunk early, it can help just make it a smoother outflow, instead of getting hit with everything at one time.

So speaking of how our listener will be paying this off, they say they do have enough cash to cover this expense, and so they will likely be able to cover and pay off this $10,000 or more in one go, and they also want to use their HSA, which I think is really interesting. So first, when we talk about managing big expenses like this on a credit card, do you have any other tips that people should keep in mind?

I think the biggest is just knowing that you don’t have to wait until the bill is due, and having a schedule for yourself or just a check-in to think, okay, should I make an early payment in the middle of the month, or even several, so that’s probably the biggest thing.

Yeah. You can sort of treat your credit card almost like a debit card, where once the payment posts to your account, you can log in and pay it.

That’s a trick that people I know use. My husband has had credit card debt in the past, he doesn’t anymore, and he almost treats his credit card like a debit card, and it’s almost like his trauma response where he just doesn’t want to get into credit card debt again. But it is a very helpful trick, just feeling like at the end of the month you’re not going to have this one giant bill due, but you’ll have a much more manageable amount of money due because you made tiny payments throughout the month.

I’ve mentioned this before on the podcast, but I also had a brief stint with credit card debt in my 20s, and now I do exactly what your husband does, Sara. Every couple of days, at the most, once a week, I go into my credit cards and I just pay off my balance, and that helps me with my mental accounting, which isn’t the most precise way to do budgeting in some ways, but it does help me feel like, okay, I probably shouldn’t be spending as much in this category, because I already went out to eat a few times this week, or what it might be. So that is just a good tip for anyone who wants to rein in their spending and have good general credit card and budget management.

Another thing that I found myself doing, because before the pandemic, I was pretty much mostly using travel cards only, and with travel cards, you want to bank a lot of points, so then when you book travel, you have a couple of hundred dollars worth of points available to discount off of your trip. With cash back cards, it’s just money. I would have the cash back sitting in my awards account and just let it build, thinking, for whatever reason, I needed to just have a really large amount just to redeem. Many cards actually have eliminated the minimums, you could redeem as little as a penny at a time. Some you have to redeem about $25 worth at a time, depends on the card.

But I had it in my head that I needed to squirrel away points like this. But actually, cash back doesn’t have any value if you don’t redeem it. Also, check your rewards often on your cash back cards, and redeem those rewards and get those statement credits, because that’s money off of your next bill. So if you have a giant bill and you’ve accumulated $50 worth of rewards, use them, put that $50 towards your next credit card bill and save some money.

Yes. I will say this can be a matter of personality sometimes too, because I have a cash back credit card that I love, and I love to hoard a bunch of cash built up from that, and then I treat it as my stupid purchase fund, where if there’s something that I know I probably shouldn’t buy, or something that’s just very, very frivolous, I will save up money with my cash back points and buy it with that, because it does feel like fun money in a way that my actual hard-earned cash does not. But that’s just how I do it.

That’s how I treat my Amazon card.

That one specifically. All right, Kim, so our listener is planning to split this expense across a couple of different accounts using a credit card, but also some funds from their HSA, or health savings account. Do you have any other tips for other ways people can get creative about covering similar big expenses?

Well, it is definitely worth looking into your health savings account if you have one, a flexible savings account through work, because those are all tax-advantaged accounts that can help you cover these costs. So you definitely want to first see if these costs are eligible and if you can use that, so I’m really glad the listener is thinking about that.

In these situations, some people are also comfortable turning to family and friends, either publicly through some kind of crowdfunding announcement or collection, or just privately, having private conversations. In this situation, your extended family might be invested in the outcome as well, so they might want to help you pay for it all. And if you’re comfortable with having that conversation and asking, it could be really helpful to you.

This isn’t necessarily applicable to our listener here, but if someone didn’t have the cash and still wanted the procedure, you could do what I know you mentioned before with using a credit card that has a low or 0% interest rate over an introductory period, putting the cost on that, and then as long as you make the minimum payments and pay it off before that intro period ends, that could be a really helpful way of financing the expense. And Sean, I think you mentioned that earlier.

And then, the last thing to consider, just in the case of fertility treatments, it’s always worth checking in with your insurance company, seeing what coverage you might have, so that could be a first place to check in as well. If your employer does offer different plans, then during the open enrollment period, you can compare them and make the choice that makes the most sense for you with all of these expenses in mind.

Great. Well, Kim, thank you so much for sharing your insights with us today.

Of course. Thanks for having me.

And that’s all we have for this episode. Listener, remember that we are here for you and your money questions, so send them our way. You can call or text us on the Nerd hotline at (901) 730-6373. That’s (901) 730-N-E-R-D. You can also email us at [email protected], visit nerdwallet.com/podcast for more info on this episode, and remember to subscribe, rate and review us wherever you’re getting this podcast.

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