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The Best Way to Pay on Black Friday May Have a 'Huge Drawback,' Analyst Says — But it's Still the 'Gold Standard.'

Although shoppers are expected to spend the same amount on holiday gifts this year as last year, on average, they will still shell out $1,455, according to a recent report.

November 23, 2022
12 minutes
minute read

As the peak shopping season kicks into high gear, more Americans are struggling financially. This is a difficult time of year for many people, who are trying to make ends meet and provide for their families. We hope that everyone can find a way to make it through this holiday season.

Although shoppers are expected to spend the same amount on holiday gifts this year as last year, on average, they will still shell out $1,455, according to a recent report.

The payment method you choose at checkout can have a big impact on your finances. If you're trying to save money or stay out of debt, it's worth considering how your payment method could help you achieve those goals.

There are a few different ways to pay for your Black Friday purchases, and each has its own advantages. Credit cards are a good option if you're looking for flexibility and rewards, while buy now, pay later options can help you spread out the cost of big-ticket items. Whichever way you choose to pay, make sure you compare prices and options to get the best deal.

Ted Rossman, senior industry analyst at Bankrate and Creditcards.com, warns that the high interest rates on credit cards can be a major drawback. "The biggest thing I would worry about is debt," he said.

Approximately 60% of Americans are living paycheck to paycheck as we head into November. This can make paying with credit look appealing, but there may be other options that better fit your financial needs.

"It all comes back to knowing yourself," Rossman said. "If you know what you're capable of and what your limits are, you'll be much better off in the long run."

According to Personal Finance, credit card balances have jumped 15%. 60% of Americans are living paycheck to paycheck, so these steps can help you tackle stressful credit card debt.

Credit cards offer convenience and rewards that appeal to many Americans. When it comes to holiday shopping, cashback or rewards cards can give an extra boost in certain categories.

According to Elly Szymanski, assistant vice president of credit card products at Navy Federal Credit Union, you should use the credit card that will give you the most value in return for the purchases you're making. For instance, a card that allows you to redeem rewards on your everyday spend for cash back, gift cards or merchandise may be your best bet for holiday shopping.

Szymanski recommends cashing in rewards if you have already accumulated them. "With many households looking to spend less this holiday season, one of the best ways to save is to take advantage of the points and rewards you've accumulated over the course of the year by using your credit card."

Credit card interest rates are at record highs and only heading higher as the Federal Reserve hikes rates in an effort to curb high inflation. With annual percentage rates close to 20%, or even 30% on some retail cards, racking up any credit card debt will come at a high cost. (In debt? Take these steps to help trim high-interest account balances.)

Chelsie Moore, director of wealth management solutions at Country Financial, cautioned against using credit cards unless you can pay them in full each month. She advised treating credit cards as if the cash is coming directly out of your checking account.

Moore suggested that if you find yourself spending beyond your budget, you may need to switch to using cash or a debit card.

The ability to spread out a purchase with no interest offers a distinct advantage over credit cards. However, studies have also shown that installment buying could encourage consumers to spend more than they can afford. Plus, some users say making a return could be trickier using this payment method.

This season, more consumers will have the option to buy now and pay later when shopping online at retailers like Target, Walmart and Amazon. Many providers have browser extensions that you can download and apply to any online purchase. There are also apps that let you use installment payments when buying things in person, just like you would use Apple Pay.

At present, BNPL loans are not subject to the same regulations that apply to credit or debit cards. This means that there are fewer purchase protections in place, including the ability to dispute a charge if you believe you have been misled or otherwise wronged. While this may be inconvenient, it is important to be aware of the limitations of this type of loan before entering into any agreement.

According to Rossman, fewer consumers use cash these days, but there may be some advantages when it comes to gift buying. For example, you may be able to make a purchase for a loved one without them knowing.

Merchants are increasingly promoting cash transactions to avoid credit card transaction fees. In some cases, paying with cash can shave roughly 3% off the purchase price.

Rossman said that there has been a backlash against credit card processing fees. One way that merchants have responded is by offering a cash discount.

According to Rossman, it's worth doing the math before you decide whether to pay with cash or credit. In some cases, you could save more by avoiding the processing fee than you would by using a credit card with cashback rewards. "This is especially true for big-ticket items," Rossman said.

Other experts say that relying on cash or a debit card can help you stick to a budget. Stashing cash in an envelope for holiday gift buying (or any other spending category) is an age-old hack to stay disciplined in your spending.

The envelope-budgeting method has recently made a comeback on TikTok in the form of "cash stuffing." This method can help you to better manage your finances and ensure that you are not overspending.

You don't need an actual envelope.

According to Moore, some people find it helpful to have multiple checking accounts with smaller amounts of cash. This way, they can have debit cards dedicated for specific purposes.

Apps like Apple Pay, Venmo and Zelle are just as easy to use as cash, and Amazon now offers Venmo as a payment option (shoppers who linked their accounts before Nov. 18 got a $10 credit to use on Black Friday).

However, like BNPL, peer-to-peer payments have varying degrees of consumer protections, which could also be an issue when it comes to getting a refund.

If you've transferred money to someone else's account and then want to get it back, you may have to work a bit harder than if you'd used a credit card. With a credit card company, you can often request a refund and have the charges reversed almost immediately. The credit card company will also fight on your behalf if necessary.

"It's difficult to undo something once it's been done," Rossman said.

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