How To- Cash or Credit?

There is a lot of debate between whether to make purchases with cash or credit. A credit card makes it very easy to spend more than you had budgeted. A credit card can also make it very easy for you to earn points on expenses you would have anyway, which can easily pay for your annual vacation or be accrued toward a new car.

The easiest choice is to use a credit card to automatically pay for any fixed, recurring expenses you have which you have in your budget. This would include insurances, utilities, cell phone(s), your mortgage or rent, etc. Then you can set up a recurring payment from your checking account to pay the amount that has accrued every pay period.

If you have the discipline to stay within your budget for variable expenses, including groceries, food, gas, etc, you could follow the same principle for those purchases. If you do not have the discipline to stay within your budget, you may want to use cash for these purchases.

You will also want a credit card for when you travel. Not only is it safer not to travel with a lot of cash, some credit cards offer 0% foreign transaction fees. This can be a sizable savings over time and depending on the trip. Many travel credit cards also offer trip insurance, car rental damage insurance, and even concierge or lounge perks.

You will want a credit card for when you rent a car. If you use a debit card, the car rental company will want a large downpayment and it may take a couple weeks after you return the car before the company refunds your money.

If nothing else, you will want a credit card to help you build your credit. See “How To- Build Your Credit” for more information.