So, is it best to pay for things with Cash or Credit Cards?
Some people hate credit card, and I understand and sympathize! When your credit debt is too high, it’s like walking around with some type of huge invisible parasite attached to your neck. So for this group credit cards should not be used!
To help people identify which to use (credit or cash), I’m am going to write a 2 quick decision lists:
When to use Cash only:
- You are carrying a credit card balance that you don’t pay off every month, and that balance is greater that $500.
- You are shopaholic (not sure if you are? Click here to take the test)
- You are saving for a house down payment.
- You are an impulsive buyer.
- You are in deep debt (non-mortgage debt…).
When to take advantage of use Credit cards:
- You have great financial willpower and judgement.
- You are debt-free (excluding your mortgage)
- You always pay off your balance(s) every month
- You are automatically contributing savings to a retirement account of some sort.
- You have the reward credit cards, with no annual fee.
- You like getting a discount of a few percentage point on every purchase by using the reward credit card mentioned above.
So, whether to pay for things using cash or credit card depends on two primary facts:
- You have a high degree of financial savvy.
- You are not in credit card debt already.
Readers, can you think of any points that I many have missed?
If you search the web, you’ll find many great debt to debt-free (or almost debt free) financial savvy blogs out there, some of the ones off the top of my head are: DeliverAwayDebt, FrugalDad, Enemy of Debt, Fabulously Broke in the City and Finance Freelance Life (formally know as MrsMicah.com)… There are many other too…
Regards,
- MR
Great cash only guidelines.
We are using our CC for our Maui trip and then going to PIF it the cash sitting in the savings account that was meant for this trip.
It’s easier to order everything online, enjoy the trip, and then pay it off after its all been enjoyed.
Ah, good point! Another great reason to go with credit cards.
I wrote this article because I have friends that cut up there credit cards (except for 1 emergency one that’s in the freezer, wrapped in plastic).
I use my credit card for as many purchase as possible. And I will continue to do so as long as they don’t start charging too many bogus fees.
Have a GREAT trip!!! It sounds wonderful!
Hopefully in a 2 or 3 years we’ll get to go down there on vacation too.
So far, I’m the only one in my family that hasn’t been there…
I will use my credit card every time but then I always pay my balance. I guess I am what the credit card companies call a dead beat.
Me too, I wonder if they really call us deadbeats, or if someone started that rumor…
Either way, it’s a great way to do it!
Not a bad summary of the pros and cons of credit card and cash use. Too many people tend to favor one type of payment exclusively, believing that their favored method is the best, without looking at the pros and cons of both.
@Roger
Cash and Credit Cards are just tools to accomplish a goal.
But with any power tool, some financial tools require more care than others, such is the case with credit cards.
It’s totally true. Impulsive buying and credit cards definitely don’t go unless you’re trying to climb all the way to the top of the highest debt ladder. But it’s also true that credit cards can have their advantages as well. If you can handle it who wouldn’t want some little bonus rewards?