The holidays will soon be upon us all. While this should be a time to set aside our differences and enjoy the company of our families, they often turn into a last-minute race to the perfect gift.
Our busy lifestyles typically don’t allow us to plan in advance and we often find ourselves browsing the internet and visiting store after store hoping to find something that our loved ones will enjoy. Once the item has been located and acquired, the next step is finding a convenient way to pay for it. The most common payment methods are cash, credit, and layaway plans. No matter which way you pay for your gift, all of them have hidden pros and cons. In this article, we’ll take a look at the reasons why certain payment options are preferable to others.
Breaking The Piggy Bank: The Pro’s And Con’s of Using Cash
On the surface cash surely seems like the most viable and convenient option. Step to the register with your item and the right amount in your hands, let the clerk do the magic, and walk away with your product. Simple, isn’t it? The truth is unforeseen circumstances can make it a bit more complicated than that. While cash might be the easiest to handle, it is usually the hardest to acquire. If you managed to save up some money during the year and have the bills stashed under your mattress, using them is the best idea. After all, you put that money away for the specific reason of being able to purchase your gifts and you won’t be missing it when it’s gone.
Sadly, unforeseen expenses have the bad habit of showing up just when you don’t expect it and least need it. During the year, your car might have broken down, or one of your major appliances might need replacement. When you’re left with such high-priority problems to be solved, your savings may end up invested elsewhere. If this savings was your primary (or possibly only) way to pay for your gifts, desperation might set in. It is important to be prudent. Predatory lending abounds during the holidays, and you must be careful not to fall into the trap.
While there are many instant loans companies that are more than happy to lend you money, you should steer clear of them. These firms are designed to make a profit out of your misfortunes. Their obscenely high interest rates mean you have to pay back much more than you borrowed from them, even if you let only a couple of months go by. It is not uncommon to have triple-digit interest rates on their loans.
For those that don’t have cash, often a credit card or a layaway is the solution. These too, though, have a few well-hidden cons.
Swiping Your Way to A Happy Holiday: Using A Credit Card
Credit cards have been increasingly popular among teenagers, young adults, and mid-income families in recent years.
They are easy to carry, accepted just about anywhere and allow you to buy items without having to flash your cash or call your bank. The fact that there’s usually a PIN protecting each transaction and that they are useless without it means that someone with a credit card is a lot less likely to be robbed.
Understanding the process behind each swipe, though, can help avoid nasty surprises and future headaches. First of all, to get a credit card, you will need to show that you have a somewhat steady income and pass a credit check.
Every time you input your personal number, you are asking your credit company for a small loan. Based on your past performance, the company will either accept or deny your request. If the transaction is approved, they will then pay for your items and expect you to refund the entire amount when your next statement is due.
Obviously, nobody will give you money for free. Just like instant loan companies, a credit firm will charge you for the pleasure of lending you a hand. The interest is usually a fixed percentage of the total cost of the item. Although credit cards usually have smaller interest rates than instant loan companies, they still can be quite high.
When payments are due, you will have to give them back the original amount plus the interest. A gift that could have cost you 100 dollars, for instance, might end up costing you 10, 15 or even 20 dollars more.
Credit Cards might be a good idea when cash is not available, but they will always come at a price. Some credit companies not only charge interest, but they also have additional fees simply because you have their card. Annual fees and interest expense are something you want to consider before deciding to use a credit card for your holiday shopping.
Divide et Impera: The Processes Behind A Layaway Plan
The Latin expression “Divide et Impera” is loosely translated as “Divide and Rule, ” and it certainly describes the way a layaway plan works.
A layaway plan allows you to split the total amount of your gifts into several small payments. These can then be paid over time until you reach the full amount. The seller may ask you to make a down payment, pay a percentage of the price upfront or charge you with other fees.
Layaway plans are, by far, the most varied way to pay for your gifts. These plans are created by the seller offering them, and so rules and regulations will vary. Their pros include the fact that you can make payments as you get paid and at times postpone your payments. Getting a layaway plan usually doesn’t require a credit check and is a good option for those that live “paycheck to paycheck” or have bad credit who may not otherwise be able to afford the purchase. Last but not least, layaway programs usually don’t involve interest charges.
The cons of this payment option are the hidden fees or penalties that may be behind it. Sometimes, you are paying fixed percentages, and these may be extremely high, especially when buying smaller items. Some layaway plans also involve strict deadlines. Not being able to meet one may result in even more fees or the cancellation of your layaway plan.
If you decide that you don’t want the item you purchased or you are not able to pay it in full by the approved date, you may end up losing part of the money you have already shelled out.
Layaway plans should be considered as a final resort when everything else seems to be out of reach. Be sure to read the fine print and ask about any fees or penalties that are associated with the plan.
In Conclusion
Any payment arrangement other than cash will result in you having to pay more than the original price of your gift. While the other payment options might be more convenient solutions in the short run, they are a waste of money.
When possible, the best idea is to budget ahead. Yes, it might sound hard or even impossible for some, but when saving is done correctly, it will give you the chance to survive the holiday season and avoid spending more money than necessary.
Purchasing your gifts ahead of time is also a smart, money-saving move. This early planning strategy allows you to buy as you get paid and also gives you time to shop around for the best prices. It may surprise you to know that some stores lower the prices of the least wanted items during the holidays while marking up the most popular items.
If you don’t want or can’t afford to spend money to celebrate the holidays, consider going for an alternative, non-commercial solution. Remember, the holiday season is a time when families come together, and gifts are a nice but not essential accessory to this beautiful time of the year.