{"id":3303,"date":"2021-01-16T20:23:13","date_gmt":"2021-01-17T04:23:13","guid":{"rendered":"https:\/\/www.cashry.com\/blog\/?p=3303"},"modified":"2023-02-24T09:26:14","modified_gmt":"2023-02-24T17:26:14","slug":"should-i-use-cash-or-creditcard","status":"publish","type":"post","link":"https:\/\/www.cashry.com\/blog\/should-i-use-cash-or-creditcard\/","title":{"rendered":"What Should I Use – Cash vs Credit Card?"},"content":{"rendered":"
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You\u2019d really like to make a few repairs on your home. Or, maybe you\u2019re thinking about upgrading your wardrobe a bit as you look for a new job. It might be time to schedule that dentist visit you\u2019ve been putting off. Or perhaps you\u2019re simply wanting to take someone special to a nice dinner for their birthday. Whatever the need, in the cash vs credit card competition, what should you do?<\/p>\n\n\n\n

You can afford whatever it is \u2013 at least, you\u2019re pretty sure you can. But you\u2019ve been considering some of the free financial advice you\u2019ve found here and across the Goalry family. As part of your New Year\u2019s resolutions, you\u2019ve been reading up on the importance of taking more effective control of your personal finances and you want to be as responsible as possible heading into the new year. As a result, you\u2019re thinking a bit more strategically these days about how you spend money. Not just what<\/em> you spend money on, although that\u2019s obviously pretty important itself. You also want to be smart about how<\/em> you spend that money.<\/p>\n\n\n\n

Most of the time, it seems like there are really only two basic options \u2013 cash vs credit card. So, what should it be?<\/p>\n\n\n\n

It\u2019s Simple. Wait \u2013 Isn\u2019t It?<\/h3>\n\n\n\n

Let\u2019s be honest. We both know that most of the time, it\u2019s better to spend cash and avoid using credit cards unless there\u2019s a pretty good reason to do otherwise. Credit cards are the Devil\u2019s greased slip\u2019n\u2019slide to overwhelming debt and ruined credit, right? I\u2019d save a lot of pain and suffering if I cut these darned things up right now and fed the pieces down the garbage disposal! (Note: DON\u2019T DO THAT! I said it for dramatic effect.<\/em>) Boo credit cards! Personally, I\u2019d just as soon never ever EVER use one again!<\/p>\n\n\n\n

Wait, I didn\u2019t mean you could take them away from me! Give those back! There are things I just can\u2019t do without them! Plus, that one has my favorite hockey team logo on it! And I get cash back on that one there! Can I just keep\u2026 I dunno, three or four of them?<\/p>\n\n\n\n

Some of you may have a similar love-hate relationship with your cards. We think we need them, but we also know how much trouble they cause. We\u2019re also pretty sure we HAVE to have them for some things, right? Like, um\u2026 oh! Travel! Yep, gotta have plastic to travel \u2013 to book a hotel, get a flight, or\u2026 I mean, not that we do those things these days. But if we did, boy howdy! Or, um\u2026 online shopping! That\u2019s important. Especially when we\u2019re supposed to minimize our contact with others. I mean, we do NEED them, right?<\/p>\n\n\n\n

Are you sure about that?<\/em><\/h4>\n\n\n\n

Whatever your answer and your opinion regarding credit cards, let’s assume for the moment that most of us have at least one credit card and that using it is a legitimate option in some circumstances. Of course, just because I CAN do something doesn\u2019t mean that I SHOULD, right? So when it comes to cash vs credit card, when is it a good idea to use a credit card \u2013 if ever?<\/p>\n\n\n\n

When Is It a Good Idea to Use a Credit Card?<\/h2>\n\n\n\n

Let me start off by saying unequivocally that most, perhaps ALL, of these potential advantages assume you\u2019re paying your balance in full every month.<\/strong> As this is a sine qua non condition to avoid bad consequences of using a credit card, and a sine qua non condition to use your credit card responsibly<\/a>.<\/p>\n\n\n\n

That matters, because pretty much any possible advantage to using your credit card is quickly neutralized by even a few months\u2019 interest on your unpaid balance. No perks, no convenience, no consumer protection plan is worth a ruined credit score and the swamp of credit card debt so common these days.<\/p>\n\n\n\n

One other thing. I realize that \u201ccash\u201d means, well\u2026 cash<\/em>. For our purposes, however, we\u2019ll occasionally broaden that definition a bit to include things like debit cards, prepaid credit cards, or even old-fashioned checks. Why? Because they\u2019re all ways to avoid going into debt in order to make a purchase \u2013 and in some situations they offer at least some of the benefits of using plastic without the whole \u201cswamp of debt\u201d element.<\/p>\n\n\n\n

If you\u2019re confident in your ability and willingness to avoid a monthly balance, here are few times it MIGHT make sense in the cash vs credit card debate to choose\u2026 well… credit card<\/em>.<\/p>\n\n\n\n

1. When You\u2019re Out Of Town<\/h3>\n\n\n\n

It\u2019s neither convenient nor wise to travel with wads of hundred dollar bills in your pockets. When you\u2019re out of town \u2013 especially on business, when everything has to be documented \u2013 cautious credit card use might be the best way to go. While you should still save receipts and use the same care as you would with cash, credit cards give you a detailed backup plan.<\/p>\n\n\n\n

In case of an accident or theft, cash is gone forever, while credit cards can be locked or cancelled with a simple phone call. Most issuers offer decent fraud protection when using their cards; you\u2019re unlikely to find a similar guarantee when fishing around in your wallet for twenties. This is true even when you\u2019re not out of town, but there\u2019s a vulnerability to being away from home that makes everything more difficult when the unexpected occurs.<\/p>\n\n\n\n

Most hotels require a credit card for \u201cincidentals,\u201d even if you\u2019re paying your bill in cash. While they won\u2019t charge you unless you incur expenses of some sort, the process places a hold on your card of anywhere from $50 to the cost of your entire stay plus minibar expenses and breaking a few things. It\u2019s no big deal with a regular credit card, as long as you have a comfortable amount of available credit. It can be rather inconvenient with a debit or prepaid card.<\/p>\n\n\n\n

If you need to rent a car, the situation is much the same. Good luck getting those keys without a card on file to protect the renter. So, cash vs credit card when travelling? I\u2019d probably go with credit card. That said, there are ways around all of these issues with a little planning. If you prefer not to use cards, it\u2019s doable. Inconvenient, but doable.<\/p>\n\n\n\n

2. When Shopping Online<\/h3>\n\n\n\n

There are alternatives to using a credit card to shop online. I\u2019m a pretty simple guy, so I tend to use PayPal because it\u2019s widely accepted and easy to use in both directions. There are even mechanisms allowing you to dispute a transaction with PayPal or most any other online payment option.<\/p>\n\n\n\n

Few of them match the simplicity or reliability of most credit cards, however, when it comes to protecting you with online purchases. If something never arrives, shows up damaged, or otherwise isn\u2019t what you paid for, most credit card issuers protect you while you dispute charges with the merchant or delivery service. Merchants need to be able to process credit cards, and credit card companies need people like you to use them to make purchases (otherwise they don\u2019t make any money). That means that when it comes to merchant-customer disputes, their default position is to be on your side.<\/p>\n\n\n\n

Yeah, I know \u2013 it\u2019s a bit wacky to think of credit card companies as on your side. I wouldn\u2019t get too comfortable with the idea. It\u2019s all about protecting their own self-interest. It\u2019s just that in these scenarios, your best interest IS their best interest.<\/p>\n\n\n\n

Cash vs credit card for online purchases? From major online retailers, it\u2019s probably better to pay as you go using a debit card, PayPal, or other electronic form of payment. Whatever else you can say about Amazon or the other major sites, they\u2019re pretty good about resolving customer problems in your favor. When doing business with individuals or smaller companies you don\u2019t know that well, credit card might just be the safest way to go.<\/p>\n\n\n\n

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3. When You\u2019re Planning To Buy Lots Of Stuff<\/h3>\n\n\n\n

There\u2019s a similar dynamic when you\u2019re shopping for back-to-school clothes or making multiple other planned purchases at different places around town. As long as you\u2019re still budgeting for the expenses ahead of time and being strategic about your purchases, it might make more sense to carry plastic than paper. There\u2019s the accuracy issue \u2013 it\u2019s hard to lose track of what you\u2019re spending where when you can pull up a detailed statement almost instantly.<\/p>\n\n\n\n

Many of the same security features apply as well. Drop your wallet or lose your purse at the mall and the cash is almost certainly gone. As long as you make the appropriate calls, however, you\u2019re generally protected from serious liability related to your plastic.<\/p>\n\n\n\n

Then again, as we discussed above, a debit card or prepaid credit card work just as well for these things most of the time. So cash vs credit card for major shopping trips? I\u2019m going 50\/50 on this one. But budgeting for your needs ahead of time? Always<\/em><\/strong>. You\u2019ll feel better during and after, and you\u2019re fare less likely to end up unable to pay your bills at the end of the month.<\/p>\n\n\n\n

4. When You Want Additional Protection<\/h3>\n\n\n\n

You\u2019re probably tired of being asked if you want to add an extended warranty to pretty much anything you buy these days. Electronics, appliances, even some toys. Personally, I find it odd that anyone would pay even a few extra dollars for an extended 2-year warranty on a $23 coffee pot, but hey \u2013 that\u2019s the 21st century life.<\/p>\n\n\n\n

Many credit cards include their own protection plans or automatically extend manufacturers\u2019 warranties when you use the card to purchase the item. You don\u2019t have to choose it or pay extra-fees for it; it\u2019s just a feature of the card. If you\u2019re not sure what your card does or doesn\u2019t cover, it\u2019s easy enough to find out.<\/p>\n\n\n\n

So cash vs credit card for buying electronics or any other items with potential additional protection? I\u2019m going with the credit card on this one, at least if it offers any benefits regarding protection.<\/p>\n\n\n\n

5. When You Care About Rewards, Points, or Perks<\/h3>\n\n\n\n

I hesitate to even include this one, but there\u2019s no denying that it\u2019s possible to milk maximum benefit out of your credit cards without sliding into a destructive cycle of debt. My wife is a shining example of this. I don\u2019t think she\u2019s paid a dime of interest to a credit card company in the time I\u2019ve known her. On the other hand, she weighs and considers cash back options<\/a>, earns points towards this or that, and is perhaps the most strategic person I know when it comes to budgeting and spending over the long term.<\/p>\n\n\n\n

I mean, I\u2019ve done the long crawl out of debt and experienced how it changes the way I view money and think about spending. I budget and plan more than I\u2019d have thought possible \u2013 let alone necessary \u2013 a few decades ago. But she\u2019s never gone to the dark side. She just loves being organized. I think the purchases she makes with her cash back savings or the other perks she uses give her the same rush I get when I finally beat the Destroyer or R.A.M. or whatever on the family X-Box (by which I mean \u201cmy personal stay-away-or-else X-Box\u201d).<\/p>\n\n\n\n

Also, I don\u2019t actually get anything for beating a big boss baddie. I have a warm toasty feeling, I guess \u2013 but she has a new laptop, PLUS a warm toasty feeling. Clearly she\u2019s doing something right.<\/p>\n\n\n\n

If you have the opportunity to earn discounts or other perks FOR STUFF YOU\u2019D ACTUALLY USE OR BUY ANYWAY<\/span>, and you have a budget that allows you to pay your card balance in full each month, a strategic selection and use of credit cards can let you do this. Be honest with yourself, however. If you know you\u2019re not likely to keep track of everything<\/a> the way you should, or you don\u2019t really need the specific perks or options they\u2019re dangling in front of you, walk away. Cash vs credit card for perks and points? You know yourself. What do you<\/em> think?<\/p>\n\n\n\n

6. When You\u2019re Trying To Build (or Rebuild) Your Credit<\/h3>\n\n\n\n

I know, I know \u2013 completely counterintuitive, right? Using credit cards to IMPROVE your credit? Just hear me out on this one.<\/p>\n\n\n\n

Your credit score, as well as your overall credit report, are all about your credit worthiness. The basic question lenders want answered is, \u201cCan I count on this person to pay back my loan?\u201d One of the ways to prove you can manage debt effectively is to, well\u2026 manage some debt<\/em>. Paying cash may be the safer, more responsible thing to do, but it won\u2019t help you get a lower interest rate on your mortgage or next vehicle loan because it does little or nothing for your credit score or overall credit history.<\/p>\n\n\n\n

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