Black Friday bargain hunters shop at a New Jersey Walmart on November 26, 2021.
Tayfun Coskun | Anadolu Agency | Getty Images
More and more Americans are struggling financially just as the peak shopping season gets into full swing.
Still, there will still be shoppers pay out $1,455on average for holiday gifts — the same as last year, according to a recent report.
In addition to how much you spend, the payment method you choose at checkout can go a long way in helping you save money and avoid debt.
From credit cards to buy now, pay later, here’s a breakdown of some of the best ways to pay this Black Friday.
“The credit card is the gold standard when it comes to rewards and buyer protection, but the interest rates are a huge downside,” he said. Ted Rossman, chief industry analyst at Bankrate and Creditcards.com. “The biggest thing I would fear is debt.“
Roughly 60% of Americans are living paycheck to paycheck heading into November. This can make paying with credit seem appealing, but there may be other options that better suit your financial needs.
“It comes back to knowing yourself,” Rossman said.
Most Americans rely on credit for convenience, as well as rewards and buyer protection programs. When it comes to holiday shopping, cashback or loyalty cards offer a bonus of 2% or more in certain categories.
“If you have multiple cards in your wallet, use the one that gives you the most value in return for the purchases you make,” said Elly Szymanski, assistant vice president of credit card products at Navy Federal Credit Union. “For example, a card that lets you redeem everyday spending rewards for cash back, gift cards or merchandise may be your best bet for Christmas shopping.” (CNBC Choose has a complete overview the best cards for holiday shopping.)
If you’ve already deposited rewards, now’s a good time to redeem them, Szymanski added. “With many households looking to spend less this holiday season, one of the best ways to save is to use the points and rewards you’ve accumulated over the year with your credit card.”
However, credit card interest rates are at record highs and only heading higher as the Federal Reserve raises rates in an effort to curb high rates. inflation. With APRs close to 20% or even 30% on some retail cards, collecting any credit card debt will be expensive. (Indebted? Take these steps to help reduce your high-interest account balances.)
“Credit cards should only be used if you can pay them off in full each month,” cautioned Chelsie Moore, director of wealth management solutions at Country Financial. “Use them as if the money were coming directly from your checking account.
“So if you find yourself spending beyond your budget, you may need to switch to cash or a debit card,” Moore said.
The option to spread the purchase without interest offers a significant advantage compared to credit cards. However, studies they also showed that buying on installments could encourage consumers to spend more than they can afford. In addition, some users say make a comeback — which is key when it comes to holiday gifts — can be more complicated using this payment method.
This season, more consumers will have the option to buy now and pay later when shopping online at retailers such as target, Walmart and Amazon and many providers also have browser extensions that you can download and use for any online purchase. Then there are apps that allow you to use installments when buying things in persontoo — just like you would with Apple Pay.
Currently, however, BNPL loans are not subject to the same regulations as credit or debit cards, and purchases are fewer. protections, including the ability to dispute a charge if you purchased a good or service that was not delivered as promised.
Fewer consumers use cash at all these days, but according to Rossman, buying gifts can have some advantages, including being able to shop for a loved one under the radar.
Merchants are also increasingly promoting cash transactions to avoid credit card transaction fees, so in some cases paying cash can reduce the purchase price by around 3%.
“There’s been a backlash around credit card processing fees,” Rossman said. “One of the levers merchants are pulling is offering a cash discount.”
Rossman advises shoppers to do the math: The processing fee savings could exceed what your credit card offers in cashback rewards. “Especially if it’s a big-ticket item, it could really add up,” he said.
Aside from the potential savings, relying on cash or a debit card can help you stick to a budget, other experts say. Putting cash in an envelope to buy Christmas presents (or any other spending category) is an age-old trick for staying disciplined in your spending.
Just recently, the envelope budget method returned to TikTok in the form of “cash stuffing.”
Of course, you don’t need an actual envelope.
“Some people find it helpful to have multiple checking accounts with smaller amounts of cash, then you can have debit cards set aside for specific purposes,” Moore said.
Nurphoto | Nurphoto | Getty Images
Applications like Apple Pay, Venmo and Zelle work just like cash and are almost as easy to use – even Amazon now offers Venmo (shoppers who linked their accounts before Nov. 18 got a $10 credit to use on Black Friday).
But like BNPL, peer-to-peer payments have varying degrees of consumer protection, which can also create a problem when it comes to refunds.
Trying to get money back into your personal account after it’s been transferred to someone else can take more work compared to asking your credit card company for a refund, which often reverses the charges almost immediately and fights on your behalf.
“It’s like putting toothpaste back in the tube,” Rossman said.