Holiday Shopping 2021: Should you pay with credit cards, Venmo, PayPal, or a “buy now, pay later” plan?


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We are in the midst of the holiday shopping season, having gone through nearly a month of Black friday offers. With supply chain shortages, inflation and the new omicron coronavirus variant, buying gifts is probably different this year. And the way we pay for these gifts could change as well.

When choosing a payment method for your purchases, you should consider factors such as security, cash on hand, convenience, and budget. According to a November Apple poll, 69% of Americans calculated their payment method based on which method offered the best rewards. In a recent CNET survey, the majority of respondents (54%) said they plan to pay for their holiday gifts with a credit card.

There is a lot of cash back and rewards credit cards. However, shopping is not just a competition between credit and cash. The number of options at checkout is increasing, both in physical stores and online. Besides Apple Pay and Google Pay, there are PayPal, Venmo, and CashApp. You can even pay with crypto using a Coinbase or BitPay debit card.

Not sure which payment method is right for you? We’ll go over the pros and cons of each so you can decide.

Credit card

A good way to earn money or other rewards

There are many reasons to pay with a credit card. Most of them offer security features, such as EMV chip technology (designed to protect your card information), fraudulent charge protection, and purchase protection.

Some credit cards also offer rewards every time you spend, such as cash back, travel miles, or points. If you need more time to pay off your purchases, a 0% introductory credit card might be a good idea. Plus, the strategic use of a credit card – like paying off your balance in full each month – can help boost your credit score.

On the other hand, credit cards are risky if you can’t afford to pay off your entire balance on time. Using them to buy big ticket items that you can’t pay off within 30 days can incur interest charges and hurt your credit score.

“Be honest about your intentions,” says Farnoosh Torabi, editor of CNET Money. “If you want to use a credit card as a tool to buy yourself a few weeks to pay off in full and potentially earn points or cash back in the process, that can work in your favor. Otherwise, it’s best to save your money before making a purchase. “

Debit cards

A good way to stay on budget

In the simplest sense, paying with a debit card makes it easy: you can only spend what you already have, as the funds are taken directly from your checking or savings account. This can make it easier to keep track of your spending and protect you from overspending.

Some debit cards also offer security features, such as EMV chips, but generally have less protections than credit cards. (If you’re still swiping instead of inserting your debit card, we recommend calling your bank and requesting a chip card replacement.)

However, debit cards do not offer the same benefits as most credit cards. You can’t earn rewards when you shop, for example. And if you’re strapped for cash and need to bridge the payday gap, a debit card won’t help.

Buy now, pay later

A good way to extend payments

BNPL’s services like Affirm, Afterpay, and Klarna allow you to make a purchase now via an installment loan and pay off the balance over time. If you’re worried about paying off your balance in full at the end of the month, a BNPL service can provide much-needed relief. When used strategically, these installment plan options can help you stretch your holiday shopping budget with little or no interest.

Each BNPL service works a little differently. Some providers offer 0% financing while others charge interest, and repayment plans can span 30 days or up to 36 months.

An important distinction between BNPL services and credit cards is the way interest is charged. Credit cards charge compound interest – this means that interest accrues not only on the borrowed balance, but also on past interest charges. BNPL services that charge interest do not charge compound interest and allow you to see in advance how much interest you will pay over the agreed period.

BNPL options can be useful if you need more time to pay off a balance and don’t want to face high interest charges. Just be sure to compare BNPL’s repayment plans before committing. “Beware of late fees and how the payment company may report your inability to pay on time to credit reporting agencies. Although you don’t need credit approval to use these types With payment services, failure to pay on time can put a strain on your credit score, ”says Torabi.

To find a “buy now, pay later” package, you can purchase through the provider’s app or website. You can also choose a BNPL option when paying on a participating merchant’s website.

Read more: Here’s how to book a flight using buy now, pay later

Pay Pal

A good option for online shopping

If you are one of the 90% of shoppers buy online This holiday season, PayPal can help protect your payment information while providing additional options for financing giveaways. Although PayPal has traditionally been used as an online payment option, it now offers QR codes for shopping in participating stores.

PayPal is also hosting a variety of freebies right now, including up to $ 10 cash back on your first QR purchase from CVS (on your first in-person transaction) and an automatic raffle with weekly chances to earn $ 25, $ 50, $ 250 or $ 10,000 for account holders who spend more than $ 10 through December 19, 2021.

Here’s how you can use PayPal for your holiday shopping:

  • Third-party processor: Using the classic PayPal service, you can link payments through your preferred payment source, such as a bank account or debit card, to make shopping safer and more convenient. It’s similar to a virtual wallet, but it’s accepted by most major online retailers.
  • PayPal Credit: This payment option works like a credit card, and if approved, you will be able to charge for transactions online, often with deferred interest charges. You can also request to receive a physical PayPal credit card that you can use in physical stores.
  • Pay in 4: Paypal’s BNPL service allows you to divide the total cost of your purchase into four equal interest-free installments. The first is due on the day of your purchase, and the rest are billed automatically every two weeks.

Read more: PayPal’s Pay in 4 allows you to pay for your purchases over time. This is how it works


Another way to shop online or at participating stores

Venmo, owned by PayPal, is the most popular for you to send money to friends and family, and easily split shared bills when you’re having brunch or having a drink. You can also use the Venmo app to pay for online purchases (with select merchants), the Venmo QR code at stores like Target and Walmart, or apply for a Venmo debit card. This option may make more sense if you receive frequent payments through Venmo and want to make purchases using the money in your balance.


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