Smart Reasons to Save, Use and Invest Money

Is It Best to Pay With Cash or Credit?

Are You Pay 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 50 pound parasite attached to your neck.  So for this group credit cards should not be used!

To help identify which to use (credit or cash), I’m am going to write two “at a glance” decision lists:

When to use Cash only list:

  • 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 don’t want the loan officer to see you are deep in debt)
  • You are an impulsive buyer.
  • You are in deep debt (non-mortgage debt…).

When to take advantage of use Credit cards:

  • You always pay off your balance(s) every month
  • You are debt-free (excluding your mortgage)
  • You have great financial willpower and judgement.
  • You are automatically contributing savings to a retirement account of some sort.
  • You have 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:

  1. You are not in credit card debt already.
  2. You have a high degree of financial savvy.  Meaning that you have great money management skills.  If you don’t have excellent money management skills, consider reading my news feed:  MoneyReasons RSS.

Readers, are you a cash or credit cards guy or gal?

One of my goals at this site is to demonstrate some of the frugal and wise money management techniques that I use in my daily life, so other may see that it’s possible to get ahead on an average salary.


– MR

11 Responses to Is It Best to Pay With Cash or Credit?

  1. 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.

  2. 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… 🙁

  3. […] Money Reasons wrote an interesting article on things you should consider before using credit card. By his standards, I should have a green light. The theory is, if you can control your spending and have your consumer debts paid, the payment method doesn’t matter much. […]

  4. […] shows us when it is better to pay with cash over credit and vice […]

  5. 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.

  6. @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.

  7. 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?

  8. It doesn’t really matter which way you pay for something, the important thing is weather or not you have the money saved up for it or are you buying it on credit and then paying more in interest.