The Update

What’s the Best Way to Pay for Holiday Shopping

When it comes to covering the cost of your holiday shopping, you have several choices. Let’s take a look at some options and explore the pros and cons of each so you can make an informed decision.

Credit Cards

For many shoppers, the most obvious way to pay for a purchase you can’t cover now is with a credit card.

Pros:

• Significant purchase protection.
• Convenient payment method.

Cons:

• Interest charges for unpaid bills can be very high.
• You may be paying off these bills for months or years.
• Extended debt can hurt your credit score.
• You may be more tempted to (or unknowingly) overspend.

Savings

Dipping into savings to pay for your holiday purchases can free you from sky-high interest charges, but comes with drawbacks.

Pros:

• You’ll enjoy a debt-free holiday season.
• No incurred interest charges.

Cons:

• Depleting the savings that’s meant for emergencies can leave you up a creek later.
• You’re losing the money your savings may have earned had it been invested or saved longer.

Signature Loan

A signature loan, also known as a personal loan or holiday loan, is a loan that’s taken out with no collateral.

Pros:

• You’ll secure quick funding.
• Low interest rates compared to credit cards.
• You can stretch the repayment over a longer term for smaller monthly payments.

Cons:

• You’ll need to pay the full monthly payment when it’s due.
• Missed and late payments can hurt your credit score.

Christmas Club Account

When you open a Christmas club account, you’ll make regular contributions toward your set goal throughout the year, and then have funds you’ll need for covering your holiday purchases when the season arrives.

Pros:

• Holiday costs get more manageable when spread across the year.
• Favorable dividend rates.
• Prevents overspending and accumulating new debt.

Cons:

• Funds in the account cannot be accessed until the goal (or preset date) is reached. Tying up savings can be irresponsible for those who do not have an emergency fund.

Use this guide to make an informed choice about paying for your holiday shopping.

RGCU Financial Coaching

If you are looking for more ways to budget during the holidays, setup a 1-on-1 meeting with an RGCU Financial Coach. Our certified coaches can help you shore up your finances for the holidays, so you can focus on the festivities and not your wallet.