Should you pay with a credit card or cash?

Credit to Author: Shalini Dharna| Date: Tue, 21 Nov 2023 01:05:14 +0000

In the day and age of digital everything, credit cards seem to be the more convenient and secure way to make purchases. However, some individuals still prefer to rely on cash transactions. Many financial experts ask that you use cash if you’re bad with money, so you can be mindful of your spending. However, if you have your expenses under control, there are several upsides to using credit instead of just cash. In this article, we will explore the reasons why relying solely on cash can be detrimental in various aspects of personal finance.

Credit score and history

Credit is one of those things that you never get when you need it.  Your credit history and credit score are taken into consideration for major purchases like buying a home, getting a car loan or even getting a phone plan in some cases. Credit is something that you will inevitably need at some point in your life – and using cash is not going to help establish and build your credit score. If you are concerned about misusing credit space, pay off your credit card as soon as you make a purchase. This practice makes you mindful of how much you can pay off and allows the credit gods to see that you have used your available credit and paid it off. This will build your credit history and improve your credit score so you have good credit when you need it.

Limited financial transparency

Another drawback of cash over credit is the lack of traceability. I don’t know about you but cash seems to vanish from my wallet and receipts end up crumpled and discarded. Cash transactions lack the traceability and financial transparency that credit card transactions provide via their monthly statements. Credit card statements provide detailed records of purchases, making it easier to review and analyze spending habits. This level of transparency allows individuals to develop sound budgeting strategies and identify areas for potential savings

Points for rewards

Who doesn’t want to make money by spending money? Numerous credit cards offer enticing rewards programs, including cashback, travel miles, or points redeemable for merchandise. By utilizing credit for everyday expenses and promptly paying off the balance, responsible cardholders can accumulate rewards and maximize their spending power. By solely relying on cash, consumers miss out on these potential perks and fail to make their money work for them.

Consumer protection

Many businesses will offer discounts for cash transactions that often come without a paper trail. This, however, also means you do not have any consumer protection on the purchase. Unlike credit cards, cash does not offer any safeguards against theft or loss. If you misplace cash, it is nearly impossible to retrieve it. On the other hand, credit cards provide fraud protection, allowing consumers to report unauthorized charges and dispute fraudulent transactions. In the event of theft, credit cardholders are generally protected against unauthorized purchases, while using cash means the funds are lost forever.

Now I would be remiss if I didn’t say that credit card use comes with responsibilities. Credit card companies make money by consumers not being able to pay off the balance; so they will often offer credit increases or supplemental cards. You can follow the principles of the crash diet by only spending (on your credit card) what you can pay off immediately. Keep your credit limit low, and reasonable, and don’t fall for the incentives to increase the credit limit beyond what you know you can handle. By showing some self discipline, you can successfully build or rebuild your credit while meeting your savings goals.

The post Should you pay with a credit card or cash? first appeared on Canadian Immigrant.
http://canadianimmigrant.ca/feed