5 Reasons Retirees Should Use Only Cash for Holiday Shopping

According to the National Retail Federation (NRF) , the average American consumer spent nearly $900 on gifts, food, decorations and other goods for the winter holidays last year. This is consistent with the previous five years and a good sign that people will spend a similar amount this year.

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While many people shop online or use credit at checkout, it might be worth switching to cash — especially for those living on fixed incomes. Here’s why retirees might want to use only cash for holiday shopping this year.

Also see how to save with senior discounts this holiday season.

Money mistakes the super wealthy never make - that you might be doing now.

Credit Cards Are Simply More Expensive

Credit cards can be useful tools, especially in the face of emergencies. But they also come with hefty charges — annual percentage rates (APRs), annual fees, late fees, cash advance fees, etc. The average APR is over 24%, the highest recorded rate since 1994.

Managing fees is one thing; paying off the balance in full each month before interest gets tacked on is another. And for retirees who might have limited sources of income, carrying a monthly balance on your card can be a financial nightmare.

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“Overusing credit cards can make it easy for consumers to accumulate debt, as they are essentially borrowing money tied to interest fees if not paid on time,” said Michael Hershfield, founder and CEO of Accrue Savings . “Carrying a large balance will also increase the difficulty of paying off the debt if you don’t have the funds.”

Cash, on the other hand, doesn’t have this issue. When all that’s available is cash, it’s suddenly much easier to keep track of spending — and avoid unnecessary debt.

Cash Keeps You on Budget

With cash, retirees can stay on budget much more easily than if they were to shop online or use a credit or even a debit card.

“Using cash only when shopping in person is a great way to stay on budget, and the holidays might even be the best time for going this route,” said Todd Stearn, founder and CEO of The Money Manual . “That’s because many people make extra financial allowances for the holidays, reasoning that it’s only once a year so it’s OK to go over budget here and there. But the reality is that all those little bits of overspending can add up fast.”

Other Options Encourage Overspending

It’s hard to overspend when you carry only cash. But other options — like retail credit cards or “buy now, pay later” (BNPL) plans — make it all too easy.

With retail credit cards, all you have to do is swipe and you’re good to go. With BNPL plans, you can split payments over time, which might sound like a good idea in the moment. But these plans usually come with fees that can make the original purchase that much more expensive. In both cases, it’s easy to forget that you owe money until the bill comes due — something that could be problematic if you haven’t budgeted for it.

“Alternative payment methods such as BNPL make it easy for customers to overspend without realizing it,” Hershfield said.

This can also lead to more debt and potentially other fees.

Cash Keeps You Mindful of Spending

In a similar vein, using cash makes it easier to stay mindful of spending.

“Physical cash can also help create a sense of mindfulness, as each purchase feels more tangible,” said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com . “The reality is that it can be much harder to really get a sense of how much you’re spending when it’s all on a card. If you’ve got a budget app that tracks your spending, then that’s a good alternative too. But most retirees probably prefer just to use cash.”

There’s No Risk to Credit

As a retiree, you might think your credit score no longer really matters, but your credit can still be a useful tool even after you leave the workforce.

Maintaining a good credit score gives you the opportunity to get better rates on insurance premiums. In the event you ever want — or need — to apply for a loan or credit card, it also puts you in a better position to do that.

When you use only cash for holiday shopping, you don’t have to worry about risking your credit score with late payments or high credit utilization. Even retail credit cards can have an impact on your credit if you’re not careful.

This article originally appeared on GOBankingRates.com : 5 Reasons Retirees Should Use Only Cash for Holiday Shopping