Cash, Credit or Debit — AARP VIVA

Cash Credit or Debit

When you shop this holiday season weigh the options

Ramona Zaragoza is using strictly cash this year to buy holidays gifts. Last year, she used credit — then lost her job when her employer closed its doors. "I got into too much debt, and now I'm trying to get myself out," she says. Like Zaragoza, 55, Hispanics overall prefer cash. A poll by AARP VIVA found that for your upcoming holiday purchases, 60 percent of you plan to use cash; 25 percent, a debit card; and just 15 percent, credit. REDNOSE Cash is often the quickest way to get through a checkout line. It's anonymous, so there's no risk of identity theft. And you're less likely to get mired in debt. But cash lacks the benefits of a credit card, like extended warranties and rewards, or the protections. So when choosing a payment method, ask yourself: What am I buying? Do you need the protection of a credit card? Carmen Santiago, 59, a certified credit counselor for the nonprofit InCharge Debt Solutions, uses her debit card for most everything, pulling out her credit card only for airline tickets and online purchases, where she might need to dispute a charge. Can I handle credit? While Latinos use credit less often than the general population, they're more likely to run up a high balance and incur hefty interest. "Especially Hispanics who have recently come from countries where credit is rarely used can find themselves over their heads," says Colombia-born Beatriz Hartman of Consolidated Credit Counseling Services. Can I get special deals? You will not get cash back or points for purchases using greenbacks, but you'll often get a sweet deal with credit cards and, sometimes, debit cards. Santiago shopped around and found a debit card where, she says, "I get $40 to $50 back every month." And some store credit cards offer instant discounts — sometimes 10 percent or more off all purchases on the day you apply.

Using Credit

A new credit card law limits late fees, bans rate increases without fair notice and requires statements to set out what you're paying in interest and how long it will take to reduce your debt. Still, say experts, read the fine print. Bottom line: Use credit if you manage it well and pay off balances monthly. Otherwise, stick to cash or debit. Whatever method of payment you use, says Hubert Rivera, vice president of outreach for InCharge Debt Solutions, you may need to budget. That's just what Zaragoza is doing.

Resources*

*Book excerpts from One Year to an Organized Financial Life by Russell Wild and Regina Leeds
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