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

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In some cases, a credit card can be a helpful tool

The caveat to the above advice is if you actually can afford (and plan to) pay off your credit card balance on a monthly basis, in that case, using credit can be beneficial when shopping for essentials.

Thanks to credit card rewards programs that offer cash back or points and miles with every purchase, cardholders can stretch their money a little further, Griffin explains. For instance, you can use cash-back credit cards to pay your bill when you redeem the rewards as a statement credit.

Consider the Wells Fargo Active Cash® Card — which offers unlimited 2% cash rewards on all eligible purchases — and your cash rewards can be redeemed as a statement credit, through a Wells Fargo ATM by using a Wells Fargo debit or ATM card, as a direct deposit into a Wells Fargo savings or checking account or as a paper check. The no-annual-fee card also offers new cardholders a welcome bonus of $200 worth of cash rewards after they spend $1,000 within the first three months of account opening.

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Bottom line

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.