An estimated 28.6% of people will be using credit to pay for holiday gifts this year, down from the 31.5% that paid with credit last year. According to the Wall Street Journal, credit is still more actively used than debit for online shopping, mainly because the protections are better when using credit in case of fraudulent overdrafts.
If you’re one of the 28.6% of people using credit this year, beware of the consequences. Dallas News states, “Running up your credit card bills could be extra costly this year as card issuers scramble to change many terms before federal rules restricting their practices take effect in February. They're raising annual percentage rates, instituting fees, slashing credit limits and even closing some accounts, all of which could put consumers who carry large balances in a bind (2009).” If you are planning on using your card, make sure not to charge anything that you don’t think you can pay off in three months.
According to Michigan Business, “The number of credit cards outstanding has declined to 325 million -- down from the peak a few years ago of 425 million, according to Diane Swonk, chief economist for Mesirow Financial in Chicago (2009).”
When you’re shopping this holiday, develop a spending plan before you head to the stores and a list of people you are planning on buying for, how much you want to spend on them, and what you plan on getting them. This will make it easier to stay away from making impulse purchases. Pay in cash or use debit, but if you decide to use debit make sure you keep track of your spending and your bank balance so that you don’t overdraw your account.