Cash or Charge?

Cash or charge? We all make numerous purchases everyday, but do we put enough thought into our method of payment? Does it really matter? Absolutely! Let’s discuss some of pros and cons for paying with cash or credit. The list is by no means all inclusive. It hits the key points. The ultimate decision on how you pay for things is a personal choice.

Cash

• No chance of identity fraud.
• Leaves no paper trail.
  • If you are making a purchase for a significant other, such as a gift, there won’t be any notification on an electronic device or statement to spoil the surprise.
• You are less likely to make frivolous purchases.
  • Those caramel macchiatos sure do add up. You may spend over a hundred dollars per month on the little things you really don’t need.
• Small businesses may set a minimum threshold.
  • Credit card companies charge a small percentage to the business whenever a card is used. Many small businesses require a purchase to be at least a certain amount of money in order to use a credit card.

Credit Card

• Purchase protection.
  • All credit cards offer some form of purchase protection. The better cards offer a great deal of protection. If you have an issue with a product or service you purchased, you can often either have the charge reversed or have the credit card company fight on your behalf.
  • Premium cards offer extended warranties that go well beyond the manufacturer’s warranty.
• Points.
  • Purchases with a card accumulate points. As mentioned in Credit Card Points 101–the Basics, points are valuable.
• Convenience.
  • No need for exact change or a bulky roll of paper bills.
• Track spending.
  • Most credit cards allow you to track spending habits so you know exactly how much, and where, your money goes.
    • American Express, for example, has an excellent system that allows you to break down all of your spending into customizable pie charts or graphs. This would be particularly beneficial to those who need to keep track of business related expenses.

Bottom Line

I’ll say this over and over again…if you are not a responsible credit card user, always pay with cash unless it’s a true emergency. Credit cards can get you into a real financial mess, and the benefits that many people enjoy by paying with a card do not outweigh the years of paying off debt and unnecessary interest.

Another point worth noting is that the use of a debit card is virtually the same as paying with cash. Other than the convenience of not having to carry bills or change, paying with a debit card offers none of the perks of using a card. No protection, no points. Even though the two physical cards may look alike, they are very different.

With that out of the way, credit cards are almost always the way to go. There is both an active and passive benefit enjoyed by using credit cards. The active benefit is receiving points that accumulate over time. You can use your points for a plane ticket, hotel reservation, gift card, and so forth. The passive benefit is knowing that, should you have a problem with a purchase, you have a recourse. For a cup of coffee–no big deal. But, should you buy a 70″ television that stopped working shortly after you hung it on your wall–huge deal.

As a general rule, I pay for everything I possibly can with a credit card. The vast majority of these purchases would have been made anyway. Over the past several years I have used my points toward travel with a value worth tens of thousands of dollars. It’s a no brainer.