500 individuals were polled by Credit Sesame to learn how they anticipate paying for their holiday costs this year. The majority of consumers (43%) indicated they preferred using cash over credit cards while making Christmas expenditures. This concurs with the results of our earlier poll, which indicated that consumers (particularly Millennials) are wary about using credit cards.
Cash tends to make people spend less.
When the money is gone (from the checking account, the savings account, the envelope, your wallet, or your pocket), you simply can’t spend any more, as the most of us have learned the hard way at some point or another.
The majority of individuals do prefer to use cash, according to the Credit Sesame survey. Nearly 40% of those surveyed make and stick to a Christmas budget. Consumers who don’t have enough cash to cover Christmas expenses or who already have large credit card balances are more likely to experience debt problems after the holidays.
Ellie Kay, a family finance specialist and the author of 15 books, including her most recent, “Lean Body, Fat Wallet,” claims that many people just swipe extra on a credit card when they don’t have the cash.
The same about 14% of poll participants indicated they would either charge their holiday shopping to a credit card and pay it off over time, or they would use a credit card to pay for holiday products they couldn’t afford. Furthermore, our poll revealed that 20% of respondents regularly go over their budget, while 32% of respondents didn’t even set one.
According to Jeff Richardson, a representative for Vantage Score Solutions, “if you already have high credit card balances, sticking to cash and reducing your holiday spending overall can protect you from more debt and prevent your credit score from taking a further hit by running your balances even higher.”
Our experts advise sticking to a cash spending plan if that describes you or if you’re like the 17% of respondents who indicated they would buy themselves a holiday gift regardless of their holiday budget.
If you intend to apply for a mortgage during the 2017 spring house buying season, that is one of your main concerns. You shouldn’t charge holiday expenses that you won’t be able to pay off the following month if you currently have liabilities that total more than 30% of your credit limits. Bruce McClary, the National Foundation for Credit Counseling’s vice president of communications, warns that if you do, your credit score will suffer.
Temptations with store credit cards
It’s impossible to ignore the reality that shop credit card offers spike during this season unless you live under a rock.
In order to save 20% on your current purchase, McClary claims that retailers are aggressively pushing you at the cashier. But if you keep the balance on your credit card for longer than a month, the interest rate will outweigh those savings. In contrast to the current average bank credit card rate of 15%, [the shop card rate is] often about 29%.
If you have a credit card balance and incur interest on your Christmas expenditures, that could result in you having to pay significantly more for the items you buy. According to McClary, merchants intentionally sell you the incentive before going over the specifics of how the card functions, such as the interest rate and whether the savings are valid only for that particular day’s purchases.
Retail cards are frequently simpler to obtain, according to McClary, and consumers with excellent credit don’t benefit from greater incentives or interest rates than those with less favorable credit.
Not only a percentage off for one transaction, many standard bank cards with rewards provide 5% cash back for the full holiday quarter (which has already started). Therefore, the benefits of opening a store card usually outweigh the costs when a large-ticket item is bought by someone who can afford to pay the debt in full before interest is applied.
When numerous credit card offers arrive in the mail and at the register in every store, it’s easy to get in over your head, according to Richardson. Be careful not to accumulate so much debt that it will take you months or even years to pay off your Christmas shopping.
When credit cards are advantageous
The greatest people to use credit cards for the holidays are those that pay off their amounts in full, like the 22% of poll participants who use a credit card and pay it off the following month.
According to McClary, people who are in good financial standing and who are willing to pay off their accounts in full receive points and prizes for nearly every purchase they make and don’t experience the burden of post-holiday debt hangover.
According to Kay, using a credit card may give you choices for returns or broken or defective goods as well as extra protection through extended warranties. Debit card use (cash equivalent) does not provide those safeguards.
Manage your Christmas expenditures with technology.
Perhaps you are familiar with apps that let you check prices, find bargains, and use coupons. Apps can be used to build and maintain a spending plan or budget during the holidays. According to Kay, Mint.com and its app enable numerous users to monitor spending so that everyone stays on target. An app called Christmas List Snowball aids in keeping track of holiday spending. The Holiday Planner Lite software makes it easy to keep track of all holiday expenses, including those for gifts, travel, and food.
Even easier, McClary advises setting up automatic calendar reminders to ping you whenever you should review your budget (let’s say twice a week, for example), to notify you when your payments are due, or to remind you of your spending or saving goals.
The hardest element, according to McCLary, is creating a sound financial habit that can incorporate into your daily routine. But managing your Christmas expenditures without going into debt has a real value since there is a monetary incentive at the end.
Whittle down your holiday wish list
By setting reasonable expectations for our family of seven children, adds Kay, “we kept them on track.” “We told them they could only ask for a maximum of three gifts that fit within our spending limit of XX amount on each person.”
Kay also suggests reorganizing your want list into the following three groups:
- Shop-bought presents
- Made-at-home treats Cards
There are some folks on your gift list who ought to have been put in the card category a long time ago, she claims. To help you stay on budget, she advises using Pinterest to find unique and enjoyable methods to make homemade gifts and cards.
According to McClary’s own observations with his own young boy, “buying the newest item today is not worth skipping a credit card payment tomorrow. When there are so many other ways to celebrate the holidays, presents seem very insignificant.