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Cash or Credit?
June 24, 2009 by DebtGeniusNo Comments Tweet this post
Cash or Credit?
Benefits of Cash
* Increased Emotional Attachment - You’ve probably heard the different studies about how the average person spends more when using credit cards. Some say 8%-10%, but I’ve heard others claim as high as 12%-18%. At the end of the day, I couldn’t care less about some university study. What matters most is how it affects me. As I’ll explain later, using cash/debit triggers different reactions in my brain that I know help curve my impulse spending.
* Tangible Budgeting - There’s nothing like looking into an envelope marked “FOOD,” which holds exactly $82 and seeing the cashier ring up $90.74 in groceries. That’s the kind of in-your-face budgeting that credit cards are great at detaching you from. Sure, we are only talking about $8 in this example. But if you are like me, you love hunting for a deal, utilizing coupons, and would surely bend over to pick up a quarter in the parking lot. What’s the point of budgeting if not to save that $8 from vanishing.
* Simpler Financial Accounts - Although cash often times takes more effort to track effectively… …it does a wonderful job of simplifying your overall accounts. I’ve conversed with readers whom have over 10 different credit cards. They have one for 3% cash-back on Gas, one for 6 months same-as-cash at Lowe’s, one for 2% at Kohl’s, and one that earns triple miles every time you buy a Venti Cinnamon Dolce Latte from Starbucks. The best of the best do a great job of keeping it all together, but personally the thought makes my head want to explode into a million pieces. Call me “old-fashioned,” but I just love the ability to walk up and pay in cash.
* Prevents Unexpected Fees & Change of Services - Recently, credit card companies are really starting to play some games with consumers. Changing limits, due dates, rates, reward programs, and even annual fees has become much more frequent. Although there is currently legislation in the pipeline to combat some of this, we all know it will be a long while before the actual enforcement of the new regulations. Luckily, a pair of scissors and a phone call was all it took to elect out of this madness (actually it took months of aggressively paying down the debt, first… but you get the point).
* Lowers Risk Of Identity Theft - The less open lines of credit you have (used or not), the less your risk of identity theft. Actually, it doesn’t get any simpler than that.
Benefits of Credit Card
* Greater Convenience - If we are being honest, there is nothing easier than swiping your credit card. In fact, Visa is now promoting the new scanners that let you simply “wave” your card, as if swiping and signing were just too time consuming. There is some merit to all of this, though. If I’m really, really frustrated sometimes I’ll throw everything out the window and swipe my debit card. I know… I know… don’t tell anyone.
* Digital Tracking - I struggled with this one, at first. After all, I’m a child of the computer generation and do all of my banking and fixed-expense bill paying online. Luckily, I still get my fix with my occasional use of my debit card. We’ve also learned to maximize the benefits of tracking spending on paper, as I’ll explain later.
* Cash-Back/Rewards - Usually rewards are somewhere between 1%-3% depending on the type of card and the category of spending. The most “sophisticated” of the credit card jugglers can usually get around 2% overall. If you are able to exercise extreme control you can approach this type of return on your spending.
* Physically Safer - If your purse or wallet is physically stolen, most credit cards offer 100% protection. It should also be noted that this is true of most debit cards, as well. However, there’s no protection if some bad guy steals your cold hard cash. Although most of us aren’t regularly the victims of thieves, this is still something you should take into consideration.
* Establish Credit History - Of course, credit cards when used wisely can help build up credit history. Be careful using this as the ultimate excuse, though. The streets are littered with tons of people (myself included) who wish they never would have starting using credit cards in the first place!
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Filed under Debt Management
Tags: Cash vs. credit
