Should You Pay in Cash or Credit? (A Guide to Handle Credit Cards Wisely)

Need a cup of coffee after a meeting that drained the life out of you? Swipe. Too lazy to look for change at the bottom of your bag to pay for your lunch? Swipe.

A credit card lets you enjoy your hard-earned money, rewards you with discounts and cashback with frequent use, and pays for your daily expenses without the guilt of looking at a thinning wallet. But although convenient and rewarding, using a credit card, if not wisely, can cost more than what you think you’re actually spending.

On the other hand, paying with cash lets you watch your paper bills turn into coins. It can psychologically help in lessening unnecessary spending and lets you stick to your planned budget with the money you know you already have. Moreover, for small purchases, cash is the typical option.

Having said that, not everyone has the luxury of paying for everything in cash. Not every purchase can be made with cash, to boot. Traveling abroad, investing in property, and buying a car can be difficult to finance in a single cash payment transaction. It’s just not possible to bring that much money at all times.

Paper or Plastic? How to Decide?

In the paper versus plastic payment debate, there are things you should consider to give you the most advantage at a lesser expense. Keep reading below for some factors to look into before making your decision.

1. Pay anywhere, anytime

Thanks to technological advances in the finance industry, settling your monthly and utility payments is only a few clicks away!

Skip the long lines and the stress of handling your expenses at payment centers by logging into your account on the service provider’s website that you’ll pay for and filling out the necessary information with your credit card details. Whether you’re using a computer or smartphone, as long as you’re online, you can pay for everything you need to settle.

While it is possible to transact online through payment gateways or pay in person at affiliated merchants nationwide, settling your outstanding balances in just a few minutes without the hassle of personally going to remittance centers is certainly an attractive option.

2. What can the business accept

Paying cash is almost always the standard, whether for a small or large business. Data from Merchant365 show that a large percentage of small businesses still prefer paper bills over credit card payments. This is because of the additional bookkeeping work, complicated processes, and third-party fees they need to accommodate with the card system.

Keeping some cash with you is a great practice just in case your card is declined, your purchase does not meet the minimum spend on your credit card, or your purchase is simply too minor to warrant the use of a credit card.

3. Manage large expenses

Planning to buy a house is not a walk in the park. Making such a large purchase can be intimidating to you and your wallet. Unless you already have some emergency funds set aside, paying a large amount of cash in one transaction can drain you and may even spell trouble in case an unforeseen expense pops up.

With a credit card, you can spread out your payments into sets of smaller, monthly payments, though typically with additional fees. Using the card system instead of blowing all your cash on a single transaction can help you make your large purchases more manageable.

4. Pay for interests with less interest

Behind the sparkling promises of hassle-free payments and exciting rewards are the looming shadows of annual fees, interest rates, and late-payment fees. It is important to remember that you are also paying for hidden charges when using a credit card.

Think about it: if you’re paying with a credit card, you’re not using your own money; you’re only making a bill of expenses that you eventually must pay for at the end of the month—plus some more.

When paying with cash, you’ll only have to pay the price of your purchase. If you’re not qualified to avail of a low-interest credit card, charges to your account can significantly add to your bills.

5. Build your credibility

If you’re a big spender, using your card when making payments can help you build your credit score! The better you are at paying your credit card bills on time, the better your credit history can be, which you can use to prove to lenders that you can be trusted with future loans with excellent terms.

Balance payments made with paper bills don’t appear on your credit report. Although they might give you a stable credit score, the loans you can apply for can be limited. Instead of collecting dust, your credit score improves with every timely credit card payment in full, unlike when paying with cash.

6. Easy budget tracking

Let’s be real: keeping track of your expenses can be difficult. Overspending is only one unplanned swipe away. Credit card bills can be a headache if you’re prone to miss bill payments or your current lifestyle can only afford you to pay your card’s monthly minimum.

This isn’t to say that credit cards are only for people with luxurious lifestyles. Paying your monthly dues in full is vital if you want to maximize the rewards you can receive with a credit card without getting hit by interest and late fees.

Cash or Credit?

While credit cards dull the pain of payments, cash lets you feel more connected to the hard work you’ve done to earn money.

The next time you receive your bill, weigh out your options. Small, everyday purchases can be paid in cash, so you won’t make the mistake of racking up your monthly bill. Credit cards, however, can be efficient when making large payments so as not to break your bank so quickly.

Keep in mind that responsible financial planning is a must for either option. At the end of the day, paper bills and plastic cards are the only financial tools that can help you manage your everyday expenses.

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