The Top Ways People Are Paying for Holiday Expenses This Year: Experts Weigh In on Which Is Best
Written by
Josephine Nesbit
Edited by
Jenna Klaverweiden
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Cash or credit? They’re both forms of payment, but according to experts, some forms are better than others when it comes to paying for holiday expenses.
In a new survey from PwC, shoppers were asked about their preferred payment methods for holiday spending. According to survey respondents, debit cards were their No. 1 preferred payment method (55%), followed by credit cards (52%), cash (48%), gift cards/prepaid cards (27%), PayPal (27%) and loyalty points/rewards (17%).
While these are the top ways, experts say there’s no one-size-fits-all answer for the “best” way. “The ‘best’ way to make holiday purchases will depend on both the purchase and the individual consumer,” consumer finance and debt expert Austin Kilgore, analyst with the Achieve Center for Consumer Insights, wrote in an email.
Here’s what experts had to say about the top payment methods for holiday spending.
Gift Cards
Michelle Smoley, director of personal and college finance at Bright Horizons College Coach, said gift cards can even be more secure than cash. “They can curb spending as card balance amounts are preloaded,” Smoley wrote in an email. “They offer consumer protection, and most can be replaced if lost or stolen.”
But according to Smoley, they also have downsides. “One often overlooked downside to gift cards is they can lose value over time due to fees,” she explained. “While federal law states that gift cards cannot expire for five years, they often do expire.”
Kilgore recommended tracking your balances and, if necessary, asking a cashier before checkout if you can split purchases between payment methods. If making a purchase online, read the fine print before doing so.
Credit Cards
“The rule for credit cards is to use them only when you know you can, and will, pay off any balance in full when the bill comes,” Kilgore explained.
But Smoley also warned that credit cards make it too easy to overspend and blow the holiday budget. She recommended tracking your spending if using credit cards.
“One useful tip is to track and add up each receipt as you use your card. I use the calculator and note apps on my phone to do this,” she explained. “It does not take long to spend $500 or even $1,000 while out shopping. Those $175, $250 and even $50 receipts can add up quickly.”
Smoley also pointed out that credit cards offer expanded liability coverage in case of fraudulent activity. Plus, they offer card members the opportunity to earn rewards like airline miles or cash back.
Loyalty Points and Rewards
If you use credit card loyalty points or rewards for purchases, Kilgore advised checking your statements or online account to see your balance. “Redeem for cash or gifts. Sometimes, a card issuer will even have ‘specials’ where your balance can be redeemed for more,” he said.
But using your rewards makes sense only if you can pay off the balance each month. “Earning 1%-2% in points sounds tempting, but it’s no deal if you’re paying 20%-24% interest on the balance,” explained April Lewis-Parks, director of financial education and communications at Consolidated Credit. “Using cash or debit keeps spending intentional and your finances stress-free.”
Debt Cards and Cash
Debit cards can be a great way to pay for gifts, as they can help you avoid taking on debt, and some even have a daily spending limit, according to Smoley. But she recommended cash.
“Cash is king for curbing holiday spending and keeping your budget on track,” Smoley said. “Consumers often find it more difficult to hand over cash than it is to whip out a credit or debit card to pay for items.”
But the biggest downside to using cash is that there’s no consumer protection on items purchased. This means that if you lose the cash or it’s stolen, it’s gone for good.
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