Holiday Shopping: Cash or Charge?

According to a recent poll, seventy percent of consumers plan to use cash or debit cards to pay for their holiday purchases this year instead of credit cards or lay-away plans.

However, the National Foundation for Credit Counseling® (NFCC) explains why charging purchases and paying the bill in full is one of the best financial moves for consumers. Yet, only ten percent of those surveyed chose this option.

Credit cards offer the following benefits when paying bill on time and in full.

  1. Buy now and pay later
  2. Add positives to credit history
  3. Never pay a cent of interest
  4. Earn reward points (with some cards)
  5. Take advantage of sales
  6. Avoid carrying large amounts of cash
  7. Dispute charges
  8. Use credit conveniently
  9. Consolidate purchases with one payment

Neither cash nor debit cards offer such a consumer-friendly list of benefits, yet many people fear using credit cards.

Learning to manage a credit card is similar to learning to use a power saw instead of a handsaw, or using an electric mixer instead of a spoon. When used properly the power tools offer many benefits.

For me, the tension comes when using cash and debit cards. Having been a credit card shopper for more than forty years, why is the thought of shopping without a credit card so unsettling?

It’s because of the way I now think about money. Money is a number. Managing my money is about being comfortable with the numbers.

Credit card spending lets me purchase without instant withdrawals from my account. My balance is maintained at the level required to cover the automatic payments that are part of spending today. I also know how much I can spend today using my credit cards and be able to pay next month when the bill arrives.

Credit card spending also lets me plan my spending according to the closing date for each credit card. Even though I spread the payments out I’m still making payments interest free because I always pay my bill in full.

It’s all in the mental process. Managing money is a series of decisions, each one changing the total amount of money available for future decisions.

You can give your kids a great lifetime gift by teaching them about decision making with money using a credit system instead of cash. This is the type of financial experience your kids can have using an allowance plan like the no-cash allowance.

So I’ll be leaving the cash and debit card at home.  At the mall and online, it’s just my credit cards and me. Ho! Ho! Ho!

Follow me on social media: