Is a Credit Card Best for Back-to-School Shopping? – NerdWallet Canada

With the cost of living on the rise, Canadian parents may need to steel themselves for bigger back-to-school shopping bills. 

As you weigh payment options for the annual school supply haul, the convenience and potential perks of a credit card are tough to resist. 

But is plastic fantastic for your family’s finances? Let’s unpack the pros and cons of swiping your credit card to cover back-to-school expenses, and alternatives to consider instead.

Canadians brace for raised back-to-school costs

Roughly 9 in 10 Canadian parents of kids in K-12/college (92%) will back-to-school shop this year; among them, nearly half (47%) expect to spend $500 or more on those purchases, up from 34% in 2023, according to a NerdWallet survey of 1,014 Canadian adults of whom 296 are parents of kids in K-12/college, conducted by The Harris Poll from July 15-17, 2024.

“I would anticipate spending probably $300 just on clothes,” Tanya Hayles, a Toronto-based 45-year-old digital strategy manager, said in an audio message. She will be conducting back-to-school shopping for her son entering grade seven. “I would say overall, probably around $500.”

But it’s not just about how much Canadian parents expect to shell out on back-to-school digs and electronics — it’s also about how they plan to foot the bill. This year, plastic reigns supreme.

Most parents will turn to credit cards to cope

Sixty-five percent of 2024 back-to-school shoppers intend to pay for their purchases with a credit card. Other payment methods are less popular: 47% of back-to-school shoppers plan to use a debit card, 24% will use cash they have at home and 14% plan to pull money from a savings account. 

Credit cards are convenient but they aren’t risk free. Paying with plastic might offer short-term financial relief but the bill could sting later. 

Credit card perks and pitfalls to consider

Perks

• Earning rewards. A credit card that earns rewards, whether points, miles, or cash back, lets you reclaim some value on eligible dollars spent.
• Building your credit history. Credit card transactions are reported to the credit bureaus and contribute to your credit history. Responsible credit usage can help strengthen your credit score over time. 
• Purchase protection. If that new laptop starts to malfunction or the backpack with the triple-digit price tag falls apart after the manufacturer’s standard warranty has expired, a credit card’s purchase protection and extended warranty policies may save you some serious cash.

Pitfalls

• Temptation to overspend. Putting things on credit delays the pain of spending and may make it easier to toss unnecessary items into your cart. 
• High interest costs. Neglecting to pay off your credit card balance in full will result in interest charges that can swiftly transform your back-to-school bargains into budget-busting bungles. 
• Debt spiral. Even with a well-intentioned plan to pay down your balance, your back-to-school shopping debt may spill over into subsequent months, generating additional interest and exerting pressure on your finances. 
• Credit score impact. The longer an outstanding amount owed clings to the balance of your credit card, the greater its impact on your credit utilization ratio, which can harm your credit score. 

Back-to-school shopping payment alternatives

If credit cards don’t make the grade for your back-to-school shopping strategy, consider these other ways to pay.

Cash

Cold, hard cash as a payment method can help you stick to your budget because once the money’s gone, so is your shopping spree. 

Debit cards

A debit card offers the same convenience as a credit card without the risk of accumulating interest because you aren’t borrowing money — what you spend is entirely your own.  

“I will definitely try to lean more into debit,” Hayles said. “Unless I can avoid it, I try to do debit as much as I can.”

By tapping into existing funds, debit cards allow shoppers to stick to their budgets without sacrificing the ease of card payments.

Buy now, pay later (BNPL) services 

A buy now, pay later program offers consumers the option to split purchases into smaller, bite-size payments over a predetermined period of time. But exercise caution and read the fine print, as there may be fees or penalties for late payments. 

Bottom line

There’s nothing wrong with swiping your credit card to cover a planned expense. Just know the benefits and drawbacks of borrowing from tomorrow so you can make an informed decision when wielding plastic for back-to-school purchases.  

Survey Methodology

This survey was conducted online by The Harris Poll on behalf of NerdWallet from July 15-17, 2024 among 1,014 Canadian adults ages 18 and older, among whom 296 are parents of kids in K-12/college. The sampling precision of Harris online polls is measured by using a Bayesian credible interval.  For this study, the sample data is accurate to within +/- 3.8 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Bria Weaver, [email protected].