How to Pay for Your Holiday Shopping

Minnesota resident Jennifer Orr has herself on a cash diet this holiday season. “I’m already in debt and I don’t want it to get even worse,” she tells MainStreet, explaining that a series of unfortunate events, including a brief stint of unemployment, left her finances in dire straits.

Orr isn’t the only one in the red this December. A recent Consumer Reports poll found that 13.6 million Americans are still saddled with last year’s leftover holiday debt [link to MS rather], which may be why the majority of consumers say they plan on paying cash for their holiday purchases this year.

But is cash really the best way to pay for your holiday gifts? According to experts, it depends on the person.

“Part of the reason people go to cash is it forces you to adopt an envelope mentality,” says Marc Schwanhausser, senior multi-channel financial services analyst at Javelin Research & Strategy, a market research firm that monitors consumers’ spending habits. “Once the envelope is empty, you stop spending.”

So if, for example, you find yourself in a situation similar to Orr’s or you’re a shopaholic, cash – which Schwanhauser calls “a time-tested effective way” of staying within your budget – should absolutely be your king.  

When to Use Credit Cards

California resident Hatti Hamlin, who doesn’t carry any outstanding credit card debt, is putting all of her holiday gifts on a credit card this year. “[It] gives me mileage rewards,” she tells MainStreet. If you’re able to keep paying your bills and avoid interest charges, you might want to keep the plastic on hand.

“If you’re someone who pays off their bill on time, there’s no reason not to get something back for it,” Schwanhausser says, pointing out that rewards programs aren’t the only thing that credit cards have going for them.  In addition to offering consumers certain protections on their money (you are, after all, spending somebody else’s at first swipe), credit cards make up for some of cash’s more inherent disadvantages.