It’s tempting to whip out your credit card to fund your holiday shopping spree, but before you do – think. Do you really want to be paying for that “hot toy” of 2013 well into 2020? The problem is many people don’t think about putting small charges on a credit card. The reality is that those small purchases and holiday shopping adds up.
The average consumer will spend $421 (up 8% from last year) during the holiday season. If you put that amount on your credit card, that debt could easily double or triple depending on how long it takes you to pay it off.
Many of us had the rug ripped out from under us in 2008, when the economy was the best it had ever been and then suddenly tanked. The collateral damage was evident. Many lost their jobs, their homes and were forced to downsize their lives and their spending.
Did we learn from that dark time? According to the statistics, we have. In general, consumer debt has decreased since 2008 when it was at an all time high. The downturn in the economy spawned a new interest in frugality. Whether it was from fear of losing everything like many have across the country, or a desire to become financially independent, people started being more aware of what they are buying and somewhere along the way stopped using the plastic to pay for it.
Use Cash, Spend Less
The average American will spend less when they use cash over a credit card. Does that mean that we buy less? Not necessarily. I know from personal experience, when I want something for myself or my family – I figure out a way to get it. This is why you saw people camped out at your local Best Buy for days before Black Friday to get their hands on the latest gadget for Christmas. It’s why you saw people headed out on Thanksgiving Day to the local WalMart. Buying presents with cash doesn’t limit your selection, you are just more aware of how you are spending your money.
Stick With Your Holiday Budget
In everyday life, people with budgets spend less than those who don’t have one. If applied to holiday shopping, it will help you save money whether you are using cash or credit. Making a holiday budget is as simple as coming up with a number you feel comfortable spending and then writing down each person who you are buying for. Allocate an amount to each person and then stick to it while shopping. Using coupons and sales to get you the best deal will help you stay in your budget without sacrificing what you really want to buy them.
When Should You Use Plastic?
If you are responsible credit card user and pay your balances off before you get charged interest, then there can be many reasons to use plastic this Christmas. Some credit cards offer additional warranties on items that you buy if you use your credit card to pay for them. If they break, and you know they will, you may be able to replace them.
Another reason you need to use plastic is when shopping online. Many are hesitant to use a debit card with online purchases because it’s tied to their bank account directly. Many credit cards offer additional protection for fraudulent purchases and won’t tie up much needed funds while a dispute is being resolved.
For those of you who are terrible at keeping receipts, many retailers can look up purchases based on what credit card you used. Also, some credit cards offer incentives or cash back for purchases. Most years my holiday shopping is done with credit card points redeemed in their marketplace for gift cards or directly on gifts.
Of course there are some of us who use credit for the holiday shopping because they have no other choice. It doesn’t mean that you shouldn’t save money along the way. Make sure that you aren’t just buying something because you can put it on your credit card. Take the time to research the items you want to buy and see where you can get it cheapest. If there is a less expensive alternative, try buying that.
Will you be using cash or credit this holiday season? Do you make a holiday budget and stick to it? Share with us in the comments below!
Photo Credit: niallkennedy