Cash Versus Credit It’s almost Christmas time and you still need to buy presents for eleven relatives. Although you plan to work over the semester break to earn some extra money, your current cash resources are low you have only $250 in your checking account, and you still need to pay your half of the phone bill ($50) before you leave for home. However, you do have a Target card (current balance $1,000) and the lender recently sent you a notice that your credit limit increased by $500 to $1500.
Discuss the pros and cons of using your Target credit card for your holiday purchases. What other options do you have? While every family or group of friends likely has one person with a horror story or two pertaining to holiday credit debt, there are pros and cons to using them during the holidays. Some of the benefits of using the Target credit card include: * Available funds. The first and most obvious advantage of using a credit card is that it allows you to purchase goods and services without having to pay for them immediately.
The Target credit card would provide easy money, making It possible to afford holiday gatherings or purchase last minute gifts. * Sense of security. The Target credit card would offer far more security for purchases than simply paying with cash. Also, items purchased with the card can make returning or exchanging gifts a far smoother process. Typically, purchases made with credit cards are completely protected, meaning a lost or stolen purchase, while unfortunate, can be replaced at no cost to the consumer. * Hidden benefits.
Many times credit card companies offer Incentive programs such as Lorene miles and other discounts with each purchase, Glenn consumers more for their money and mitigating future interest payments. Although, I do not think this applies to a Target credit card. However, Just like there are two sides to every coin, there Is also a dark side to relying solely on credit cards when holiday shopping. Some of those disadvantages include: * Fees. Credit cards often carry hidden fees with them. These fees charge or deduct money from an account simply for making a purchase.
Knowing these fees and limiting how much they are charged Is essential to keeping bills low come January. Credit cards also impose hefty interest rates if purchases are not paid back in a 1 OFF timely manner. It would De wells to KICK Tort cards Witt lower rates, or pay as much toward your credit card balance as possible come bill time. * Going over budget. Credit cards can offer you a false sense of security, making you believe they have more money readily available to them than they actually do.
At a time as emotional as the holidays and in a year when many people learned the hard ay about financing more than they could afford, overspending can prove especially dangerous. * Non-flexed interest rates. Credit card companies can change interest rates on a whim, and without an account holder’s approval. Just because an interest rate is affordable today does not mean it will be tomorrow. * Identity theft. Identity theft protection has made leaps and bounds since the salad days of Internet shopping, but shopping extensively with a credit or debit card, particularly online, is still risky.
Hackers can steal personal information from hoppers who use credit cards to make purchases online. It would be wise to keep track of purchases and crosscheck statements to monitor unauthorized purchases. And, if cards are stolen, immediately notify the credit card company. There are some alternatives to using a credit card to make holiday purchases when on a low budget, which include: * Spread out your holiday purchases throughout the year—or at least throughout the holiday season. Shopping last minute often results in making additional purchases you don’t need because you are feeling rushed and frenzied.