Consumers Are More Likely to Use Debit Cards Than Credit Cards for Holiday Shopping. Is That a Good Thing?

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  • Paying for holiday purchases with a debit card means avoiding paying interest on the things you're buying.
  • It also means missing out on cash back and reward points -- and risking over-drafting your checking account.

It's sort of a mixed bag.

Even if you do your best to limit your spending and whittle down your gift list, the holidays can still be a pretty expensive time of the year. And so it's important to shop strategically during this time. That means not just taking steps to avoid overspending, but also, choosing the right payment methods for your purchases.

In a recent TD Bank survey, 42% of consumers plan to use debit cards as their main means of making holiday purchases. Meanwhile, 33% of consumers say they'll primarily swipe a credit card to pay for the things they're buying during the holidays.

That makes debit cards the clear winner this season. But is that really the best way to shop?

The upside of shopping with a debit card

When you use a debit card to pay for holiday purchases, you don't run the risk of racking up interest on them as you would with a credit card. That's because you don't get the option to carry a balance forward -- those funds are taken out of your bank account after you swipe your card so you're effectively paying your purchases off in full on the spot.

Along these lines, paying for items in full can eliminate the stress that comes with having debt hanging over your head. There's something to be said for knowing you've covered the cost of the items you're buying and not having to stress about where the money will come from to pay for them.

The downside of shopping with a debit card

Using a debit card for your holiday purchases could help you avoid debt. But you know what else you'll avoid? The reward points and cash back that come with using a credit card. And that's not great.

Those perks could help offset the cost of your holiday purchases. And as long as you make it a point to track your credit card balances and keep enough cash in your checking account to pay your credit cards in full when they come due, you won't have to worry about racking up interest.

Plus, with a debit card, there's a chance you could overdraw your account and get charged for doing so. Granted, you can easily avoid that by reviewing your checking account balance regularly and making sure you have enough money to cover your purchases. But it's a risk to be mindful of nonetheless.

It's really a matter of preference

Favoring a debit card for your holiday purchases isn't necessarily a bad idea. But then again, the same holds true for a credit card. Your best bet, therefore, is to simply fall back on whichever payment option you feel works better for you.

If swiping a debit card is the option that gives you more peace of mind, go with it. But if you don't want to give up credit card rewards and you're confident you can avoid debt, then go ahead and use a credit card or two for holiday spending.

The key, either way, is to keep tabs on your spending. If you do that, you can make either payment option work well for you.

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