Should You Do Your Holiday Shopping With Cash?

by Maurie Backman | Published on Nov. 19, 2021

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A woman browsing the shelves of a store and picking out boxes of holiday sweets.

Image source: Getty Images

Sticking to cash has its benefits -- and drawbacks.


Key points

  • Many people find that shopping with cash helps them avoid overspending.
  • Using cash for holiday shopping also means missing out on credit card rewards and other benefits.

The holiday shopping season is, for many consumers, the most expensive time of the year. In fact, many people routinely rack up debt during the holiday due to overspending online and in stores from late November through the end of the year.

If you want to avoid that fate, you may be considering doing your holiday shopping with cash only this year, and leaving your credit cards at home. But is sticking to cash a good idea?

The upside of using cash

When you pay for your holiday purchases with cash only, you set yourself up to steer clear of debt. Say you only have $500 available in your bank account to spend at stores during the holidays. If you withdraw that total and leave credit cards off the table, you'll only spend that amount -- end of story. Avoiding debt is a good way to start off the new year without financial stress.

The downside of using cash

On the other hand, when you stick to cash only for holiday shopping purposes, you lose out on the many benefits credit cards have to offer. For one thing, credit cards commonly offer reward points or cash back for the items you're buying. If you're eligible for 2% cash back on your holiday purchases and you spend $500, you'll get $10. While $10 may not be a life-changing sum, it's enough to pay for something, so you might as well enjoy it.

Furthermore, when you shop with credit cards, you're often entitled to some amount of protection. Imagine you buy something in a store, bust it out of its box, and find that it's defective. If the merchant refuses to stand by its item and won't accept the return or do an exchange, you may be able to dispute the charge on your credit card and avoid having to pay for it. If you were to buy that same item in cash, you'd potentially be out of luck in this situation.

Finally, many credit cards offer sign-up bonuses for opening a new account. It often pays to take advantage of those deals during the holidays. The danger of sign-up bonuses is that you may be tempted to spend more than you normally would just to snag that extra cash. But if you'll be spending more during the holidays anyway, you might meet that threshold naturally.

Say you apply for a credit card offering $300 cash back for spending $1,500 within three months of opening your account. If you would normally only rack up $1,000 in credit card charges, but you plan to spend $500 on holiday gifts, then meeting that target should be easy. In that situation, you could be in line for $300, which is far more generous than the amount you might get in regular reward points or cash back.

What's the right choice for you?

If you've struggled to avoid credit card debt before, then you may want to steer clear of credit cards during the holidays and stick to cash for your shopping needs. That way, you can avoid costly interest charges and potential damage to your credit score.

But if you're well-versed in how to use credit cards responsibly and trust yourself to do so, then there's no reason to limit yourself to cash this holiday season. Charging your purchases on credit cards could put more money in your pocket to offset your costs, not to mention offer protection that cash just can't mimic.

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