Cash or Credit? What You Choose this Holiday is Important

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Cash or credit? You’ll hear this one a lot this holiday spending season. But unlike paper or plastic, cats or dogs, and white or whole wheat, this age-old this or that question may have a big impact on your finances.

Cash or credit poses a financial dilemma for millions of Americans. While some swear cash is king, others borrow increasing amounts to make merry. 

When it comes to your own festivities, which one should you choose? Let’s investigate what both options offer to find out.

Should You Borrow?

Cash or credit? Proponents of this option say it’s a great idea when you can earn cashback or other rewards.

If you have a good handle on your finances — and you can pay off your purchases as you make them — there is some value in using your credit card this holiday season.

You’ll earn what’s essentially free cash for purchases you would already make, and by paying off your balance in full, you’ll keep the impact on your credit history positive. It may also be the only way you can book flights or hotel rooms if you have to travel.

Of course, there are always exceptions, depending on what type of credit you use. You won’t find a shopping assistant in something like a personal line of credit.

Financial institution CreditFresh doesn’t recommend using it on everyday expenses — even irregular seasonal holiday shopping. A product like the CreditFresh Line of Credit by CBW Bank is designed for unexpected emergency expenses. What does that mean?

Let’s say your oven bites the dust while your turkey’s thawing in the sink. With not enough cash tucked away in savings, and the imminent arrival of a hungry family, an LoC may help you take on this unexpected emergency repair.

It isn’t, however, a way to boost your grocery list to afford gourmet ingredients for your family feast or splurge on gifts outside of your budget.

Should You Rely on Cash?

By sidelining the plastic in your wallet, you avoid many of the pitfalls of borrowing. This might be the best option if you’re struggling to keep to good money management habits.

Perhaps the biggest benefit of using cash is how reluctant you are to spend it.

Psychologically speaking, it’s a lot harder giving up actual bills and coins than it is to charge something onto plastic. The result? You end up making more sensible holiday spending choices.

Nevertheless, cash isn’t without its drawbacks. It may be harder to track than the purchases in your monthly statements. You’ll also miss out on reward systems, as well as any purchase protections or liability coverage that comes with most cards.

Bottom Line?

And now, for the answer you’ve been waiting for. When asked at the till about how you want to pay, your answer depends on your unique financial situation.

This may not be what you wanted to hear. But like so many other financial decisions, only you can decide which one works best this year.

Before you head out to the malls this season, think about your options carefully. Choose the payment method that fits the best, and you may avoid overextending yourself on the festivities.

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