Entertaining, dinners, gifts, travel, and decorating may make for a festive time of year, but the holidays certainly can put a strain on personal finances. No one wants to experience a financial hangover come January. Therefore, making a plan for paying for holiday expenditures now can help the average person save and protect their finances.
Figuring out how to finance holiday purchases can be just as important as scoping out deals and cashing in coupons. Here's a look at some of the ways to pay for holiday gifts.
Credit cards
Many consumers feel that credit cards are the safest way to make purchases, whether in-store or online. With credit cards, shoppers are using a line of credit. Should fraudulent purchases be made or errors in accounting occur, shoppers aren't responsible - the credit card company is in charge of tracking down or absorbing the error.
Now that spending has increased after the last recession, credit card companies are again offering deals to lure in new customers. Rewards cards are quite popular. Such cards offer points, cash back or travel miles to customers who meet certain criteria. For those who can pay off balances and meet the requirements, these cards can help save substantial amounts of money. Keep in mind that regular cards carry an interest rate of 15 percent on average, while retail store cards may be as high as 24 percent.
Layaway
Layaway is a safe way to shop for the holidays. Layaway entitles consumers to buy an item by making installment payments. The frequency of payments depends on shoppers' ability to pay. Failure to pay will not affect a credit score or negatively impact credit standing in any way - the consumer may just lose their down payment or be forced to pay a layaway fee. Paying in installments helps lock in a special sale rate and can discourage impulse buying as well.
Cash and prepaid cards
Paying in cash can help shoppers avoid overspending on gifts. After setting aside a cash limit, once the money is spent, shopping is done. Paying in cash does carry some risk if the money is stolen or misplaced. Plus, as opposed to paying with credit, which can offer some purchase protection or built-in warranties, cash may have no protective benefits.
As an alternative to cash, consumers may want to purchase pre-loaded cash cards in various amounts. Like cash, when the value on the card is depleted, shopping is finished.
Shopping for holiday gifts requires shoppers to be financially prudent. Gifts can be paid for in various ways, and shoppers should choose the option that best suits their needs.
