Love 'em or hate 'em, you can't argue with the fact that credit cards play a major role in fueling the holiday shopping season. Last year, an estimated 50% of Americans used major credit cards, or store cards, to purchase their holiday gifts, according to a NerdWallet study. With the average shopper expected to spend over $800 this holiday season, as per the National Retail Foundation, it pays for consumers to use credit cards so they can reap the benefits involved. Here are just some of the perks you might enjoy by paying with plastic.
1. Cash back
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If someone were to walk over to you and hand you $20 just for living and breathing air, would you take it, or say "no thanks?" Chances are, you'd snap it up in an instant, and you wouldn't be wrong. Using your credit card will basically result in the same type of scenario. Since most cards offer some sort of rewards or cash-back program, you'll get free money for buying the things you were already planning to get by charging your purchases this season instead of paying cash.
2. Purchase protection
Ever buy something expensive -- say, a fancy gadget -- only to have it fall from your hands and shatter the moment you take it out of its box? It happens to the best of us, but if you use a credit card for your purchases this season, you'll be protected in the event they're lost, damaged, or stolen. Cash, on the other hand, won't offer that sort of protection, nor will a debit card.
3. Lowest price guarantees
One of the worst experiences you might have as a shopper is buying something at what you think is the best price and seeing it advertised for $40 lower the very next day. If that happens, and you've paid cash, you have two choices: rush back to the store to exchange the item for its lower price, all the while taking the risk that it might be out of stock, or bemoan the loss of $40. But if the same scenario applies to a credit card purchase, most of the time, you won't have to leave your house to get that money back. Rather, your credit card company will typically refund you the difference once that lower price becomes available. Better yet, many cards will look out for lower prices for you. How's that for service?
4. Easier budgeting
Countless shoppers create holiday spending budgets only to disregard them at some point during the shopping process. The benefit of using a credit card is that you'll have the option to track your spending all along by logging into your account and seeing the total you've racked up. When you pay cash, you don't get that same neat little record of what you've bought.
But here's why you shouldn't shop with a credit card this season
Clearly, credit cards offer certain advantages that cash and debit cards can't mimic. But despite the aforementioned reasons to shop with a credit card in the coming weeks, here's one very big reason not to: You've historically lacked self-control.
The moment you rack up a balance you can't afford to pay off by the time it comes due, you'll end up losing money to interest charges. And in that scenario, your credit card will end up costing you money instead of saving you money.
Here's an idea of just how expensive that lack of self-control can be. Imagine you rack up a $2,000 balance that takes you two years to pay off, and your card charges 20% interest. At the end of the day, you'll wind up having spent $443 extra for no good reason. Even if you manage to snag an amazing cash-back bonus of 5% on those purchases for a total of $100, you'll still wind up $343 in the hole.
A big part of using credit cards wisely is being honest with yourself about your spending habits and shortcomings. If self-control isn't your strong suit, then leave your credit cards at home when you shop this season. Decide what you're buying in advance, and take only enough cash with you to cover those purchases. This way, you won't have the option to go overboard, and you won't come to bemoan your spending decisions down the line.
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