3 tips to consider when buying essential items during high inflation, according to experts

With the high cost of living these days, Americans have shifted their spending habits to focus on buying only what they need. While things such as gas, groceries and toiletries are considered to be necessary purchases, the next question becomes, what is the best way to pay for them?

In today’s economic climate, especially now that most things are more expensive than usual, is it better to use cash, credit or debit to fund your everyday essentials? Here’s what the experts have to say.

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Avoid taking on debt to pay for essentials

Rod Griffin, senior director of public education and advocacy for the Experian credit bureau, pinpoints the following as his one universal piece of advice: Consumers should avoid taking on debt to pay for essentials.

With increased interest rates — and the expectation that they are going to climb even higher in the months to come — now is not a good time to take on debt to fund your everyday costs. That means if you can’t afford to pay off your credit card bill by the end of its current billing cycle, you should refrain from charging more expenses until you feel better equipped to do so.

As tempting as they may be to turn to when your money is spreading thin, credit cards already charge notoriously high interest rates — and they’ve gone up even higher since the Federal Reserve’s recent rate hikes.

“I would discourage using credit to pay for day-to-day expenses if you cannot pay the balance back on time and in full each month,” Griffin says. Carrying a balance is not only costly, but it can also hurt your credit score if your outstanding balance-to-credit-limit ratio, or credit utilization rate, is high.

Bruce McClary, senior vice president of membership and communications at the National Foundation for Credit Counseling, also warns against using a buy now, pay later option at checkout since these are essentially loans, or debt, that can ultimately be costly and eat away at your credit score.

“Many are presented at the moment you are ready to complete your purchase and may not require a credit approval,” McClary explains. “These are loans you have to repay, and they may come with interest and fees. There’s also the risk you could quickly [go] into more debt than you can manage.”

Even if you’re making your buy now, pay later payments on time and in full, each purchase that you fund this way shows up as its own separate account on your credit report, meaning multiple purchases can be listed as multiple short-term loans that each close once their balances are paid off. This, in turn, can end up lowering the average age or length of your credit history, which is another important factor in calculating your credit score.

Limit your spending by using cash

Consumers who can’t pay their credit card balance in full or who want to steer clear of buy now, pay later loans may want to opt for using cash instead for everyday essentials.

“Unlike credit cards that come with higher monetary limits, most consumers carry a limited amount of cash on them, making it easier to stick to their budget,” Griffin says. “Carrying cash can help consumers limit their purchases to the essentials on their list, and eliminate overspending and taking on more debt.”

In a similar vein, you can use a debit card. Though you aren’t physically limited to what’s in your wallet with a debit card, you are limited to what’s in your checking account. Since the money comes right out, you don’t have to worry about coming too close to your credit limit or being charged interest — this is assuming you don’t overdraft.

Consider using a debit card that offers rewards, such as the Discover Cashback Debit Account, which offers cardholders 1% cash back on up to $3,000 in monthly debit card purchases. Those who take full advantage of these rewards can earn up to $30 cash back per month and $360 annually.


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