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The right credit card can be a great shopping tool no matter the time of year. But during the busy holiday shopping season — especially one rife with concerns about supply chain shortages and inflation — credit cards can provide valuable protections and savings on your spending.
But other holiday shoppers may find using cash or debit instead of credit cards is a smarter option. If you have high-interest debt already, for example, or a strict budget to adhere to, cash can make it easier to avoid spending more than you plan to.
With Americans expected to spend an average $997.73 per person on holiday gifts and items in 2021, according to National Retail Federation (NRF) estimates, it can pay to choose the right spending method for your goals and budget. On one hand, that’s enough spending to quickly qualify for a credit card welcome bonus worth hundreds of dollars. But on the other hand, nearly $1,000 in holiday shopping debt is also enough to leave you paying down a balance for years to come.
Here are some things to consider when you’re choosing between cash or credit this holiday season.
When to Use Cash for Holiday Spending
You may not score as many savings or rewards, but cash can be the better option this season if your main goal is to avoid overspending and debt going into the new year.
Sticking to a Budget
If you already have a problem reining in your credit card spending, you may want to stick to cash or debit this holiday season, says credit expert John Ulzheimer, formerly of FICO and Equifax.
Paying with cash can make it easier to stick to your budget. Rather than making charges you’ll pay off later, cash can help you better visualize exactly how much you have to spend, and how close you are to overspending.
With your holiday gift list in front of you, you can easily write out the amount you want to spend, then allocate a dollar amount for each person or cause. From there, you can spend your cash according to your budget until it’s gone.
Cash is also a good option if you already have credit card debt you’re working to pay down. The average credit card interest rate is over 16%, according to data from the Federal Reserve — that’s well above …….