What to know about paying for holiday shopping

As we’re in the middle of another holiday season, it’s important to understand the different benefits and risks associated with popular payment methods. From traditional mediums like credit cards to more novel services like buy now, pay later, and cryptocurrency, here’s what shoppers should know about these payment types.  

Credit cards 

Credit cards enjoy the strongest legal protections against fraud out of the payment methods available to most consumers. Features like clear dispute processes and the ability to remotely and instantly lock a lost or stolen card provide valuable tools for shoppers to stay protected. However, remember to: 

• Regularly check the transaction activity on the credit card. Most card issuers require prompt reporting of fraud within a certain number of days for them to open an investigation.  
• Pay off the debt each cycle to avoid accumulating interest. 

Debit cards 

Debit cards have fewer legal protections against fraud, with the strongest safeguards applying to “unauthorized” payments. Generally, paying with a debit card is riskier than paying with a credit card, especially for online shopping or paying in untrusted locations. 

• If your card is stolen or you notice unfamiliar charges, contact your bank immediately. Most banks will require notice within just a few days to limit your liability. 

Buy now, pay later 

Buy now, pay later (BNPL) offerings may be attractive to shoppers looking to spread costs over a few weeks. With some BNPL servicers advertising 0% interest, buyers may not appreciate all of the risks involved with the transaction—especially since many are not immediately obvious at the moment. 

• Late fees and other hidden charges. Some BNPL companies have gotten better at disclosing these, but many shoppers who finance a purchase with BNPL may not be aware of late fees and other charges that may apply.  
• Keeping up with staggered payments. Especially if a consumer finances multiple purchases with different BNPL servicers, it can become difficult to track competing payment dates. 
• Overextension. BNPL servicers don’t usually check their users’ credit history and financial risk as extensively as credit card issuers or traditional loan companies might. Just because a seller provides the option to use BNPL doesn’t mean it’s the best method to use for the purchase.  

Cryptocurrency 

Don’t use crypto to pay for purchases. Legitimate sellers will never demand payment in cryptocurrencies (which include Bitcoin, Ethereum, and Tether). Risks include: 

• Unsafe deposits. Cash held in crypto has no safeguards—it can lose its value overnight. 
• There are no refund protections. If the digital currency is sent to the wrong recipient, a mistake is made in the transaction amount, or the buyer is defrauded, there are no refund guarantees.  
• The target for deception. Fraudsters like to use crypto as many individuals are unfamiliar with the mechanics of the system. Scammers often take advantage of this knowledge gap to steal money from others. 

Payment apps 

Similar to cryptocurrency, most legitimate sellers—especially commercialized ones—will not ask for payment over a peer-to-peer app like Cash App, Venmo, or Zelle. While these platforms can be convenient, they’re best used with friends and family. Paying with peer-to-peer apps carries a couple of important risks. 

• Few—if any—refund protections. Most payment apps do not provide refund guarantees unless one of the parties involved in the transaction pays an additional fee. While at least one platform (Zelle) has announced limited protections for victims of imposter fraud, the full extent of these safeguards is still unknown and unreliable.  
• The target for deception. Scammers have taken advantage of the near-instant transfer of funds offered by these apps, in addition to some users’ limited knowledge of the technology.