Will you be shopping with cash or credit this holiday? The coronavirus pandemic will likely sway your decision, according to a new survey by Accenture.
The 14th annual Holiday Shopping Survey polled 1,500 U.S. consumers about their holiday shopping plans, and a whopping 61 percent reported they want to reduce in-store shopping to limit the health risks to retail workers.
Staying at home to shop online is a safer option when it comes to your health, but it can pose a danger to your finances. Studies show people are more likely to overspend when using credit, and digital payment options may expose your financial details to fraud.
But that doesn’t mean you can’t shop online safely. To help you browse the digital shelves with your financial health in mind, check out these tips.
1. Understand How Credit Works
Brushing up on your financial know-how is a great idea at any time of the year. It helps you make informed decisions whenever you use credit.
When someone says the word “credit,” most people will think of the plastic in their wallets. However, “credit” is a broad term with many different meanings. It can mean any financial product that you borrow — from mortgages and auto loans to installment loans and payday loans online.
Now, some of these financial products won’t play a role in your shopping. Take, for example, online payday loans. These short term loans are reserved for unexpected emergencies. They are not meant for holiday shopping, and their rates and terms reflect that.
Compare this to a credit card. This financial product comes with a different billing process than most personal loans, so it’s better suited for your holiday shopping.
2. Pretend it is Cash
If you do use a credit card when shopping online, forget about your card’s limit. Focus on the cash you have on hand instead. Cash is the hard limit to how much you can spend — whether that’s your checking account balance or the paper bills in your wallet.
Once these run out, don’t spend any more — even if you have more of your credit limit available.
Use a budget to ensure you only ever charge purchases that you have the cash to repay, and get into the habit of paying off the full balance on time.
3. Don’t Use a Debit Card Online
If the threat of overspending spooks you, you may consider pulling out your debit card at the digital checkout. However, debit isn’t a perfect substitute for plastic. That’s because the average credit card comes with fraud liability protection that a debit card does not.
If some steals your card to do their own shopping, there’s a chance you may have to pay $50 to cover the fraud, but usually, you won’t have to pay a single cent.
Compare this to your debit card. While it may have some protections, they’re only available if you report fraud within a narrow time limit, so you’ll end up paying more the longer it takes you to catch the problem.
But this isn’t the only issue you face if your debit is compromised. If a fraudster has access to this account, they can see every other account attached to this profile. This usually includes more than just your checking account you use to pay bills — but also lines of credit, credit cards, mortgages, and investments!
There are a lot of factors that may convince you to put your holiday shopping on plastic this year. While these tips won’t guarantee a credit card is risk-free, they’ll help you shop more responsibly.