When Is Cash Better than Credit Cards?
Even people who are good with their credit cards – acknowledge that there are items that they would not have bought if they had been using cash instead of a credit card.
Paying by cash heightens our awareness of giving something away in exchange for goods. The $50 bill you hand over to make your purchase does not get handed back to you the way your credit card does. You get your credit card back whole and visibly unchanged – while if you hand over a $50 bill to buy something, you will not be getting a $50 bill back.
Unfortunately, there is often a disconnect between using credit cards and our financial reality.
If you want to stay within your budget – only using cash takes away your option to spend more. For example: if you only take $20 in cash into a store to buy an item, you will not be able to spend more than that $20 – but if you take a credit card, you can spend more than $20.
This heightened control is one of the reasons we suggest people try to use the cash only envelope method of money management. It helps people to focus on the money they really have to spend.
But There are Reward Programs with Credit Card Use
Yes there are, although they are often on cards that you have to pay an annual fee for and that encourage you to spend more.
If you are one of the 64% of Canadians the Canadian Bankers Association says pays off their credit card balance every month – and you never put anything on your credit card that you do not have the money to pay for – then maybe the rewards are worth the risk.
But, if you are one of the 36% of Canadians who do not pay off their credit cards each and every month – the ‘rewards’ may not outweigh the punishment of interest charges, and the burden of a heavy debt load.
I Need a Credit Card to Buy Online
There are ‘enhanced’ debit cards that are available that can be used online instead of credit cards. Check with your bank to see how you can get one.
While these are not credit cards, and they result in the automatic removal of cash to pay for your purchases, they still pose a danger as they are plastic and can result in the same disconnect with your financial reality as credit cards.
When is Cash Better than Credit Cards?
When you want the control of only paying with cash to stay on your budget and cut down on your spending.
