Your Credit Card Calls: When To Buy Now And Pay Later Your Credit Card Calls: When To Buy Now And Pay Later Photo Courtesy of Datanoesis When making a purchase, the ultimate decision when you open your wallet is to decide whether to use cash or pay by credit card. While credit cards can provide benefits through rewards programs and building up credit, credit cards can be the gateway to heavy debt if improperly used. Cash may be king, but if you stick to a cash-only rule, you could be doing your credit score a disservice. The Convenience Factor If you are looking for the convenience factor, using your credit card may come in handy. If you are consistent in paying your credit card balances in full each month, and you are properly budgeting to ensure that you are on track with timely payments, then putting some purchases on your card is an easy and convenient way to make transactions. For example, making purchases online using a credit card that may be saved on file could give you a quick check-out process. However, if you tend to run high balances or can’t pay your credit card balances in full, you should probably use your debit card instead; which is also convenient but functions as cash. If the purchase you want to make is on sale, and you use a credit card that carries a balance, this may negate any savings you might get with the interest that will be incurred. Photo Courtesy of VideoBlocks Using Cash May Be Cheaper In some cases using cash may get you a better price. For example, when you are ready to fill up your gas tank, you may notice that if you pay by cash, you will get a cheaper price per gallon. Some restaurants may also give discounts for cash paying customers, so if you are dining out, it won’t hurt to ask! Paying for purchases using cash instead of a credit card will also save you from accruing interest on your next credit cards bill if you are unable to pay your entire monthly balance in full. Photo Courtesy of SFGate Cash And Carry If you like to have cash on hand at all times, consider making your ATM withdrawals at the beginning of each week. Decide on an amount to withdraw that fits within your budget. You don’t want the temptation to overspend because having cash in your wallet is so easily accessible. You can also try leaving your debit card at home if you would prefer to make purchases during the week with the allotted cash amount. The cap you give yourself will not only keep you in line with your budget, but it will also put you at less of a risk of overspending. Using cash tends to force us to be a little more frugal about parting with our money because it’s so tangible. Your Credit History And Reporting While carrying cash is a great option to avoid credit card interest, it won’t help improve your credit score or build credit if you stick to an “all cash, all the time” rule. If you use your credit card responsibly and pay your credit card balance in full each month and on time, you will size up a healthy credit score. Photo Courtesy of MadameNoire A good credit score is an important tool in creating a positive financial future. Utilizing cash as your only payment option and not having any activity on your credit cards, could keep you from obtaining a car loan, mortgage or an apartment rental. Also keep in mind, that if you are traveling and want to rent a car, it can be very inconvenient to do so without a credit card as most car rental establishments won’t accept cash deposits upon rental. The Safety Component Keeping a combination of both cash and credit cards is an important element to your personal safety or even the safety of your loved ones. You may be put into a situation in which cash is your only option to get you out of a predicament. Should you be put into an emergency situation, having both cash and credit cards on hand could keep you from making your situation more difficult. Keep cash as a back-up even if you don’t intend to use it. Your credit card company can also offer you protection against identity theft and fraudulent transactions. Again, when renting a car when traveling, your credit card company may have benefits that would cover you in case you get into an accident. Before embarking on your travels, find out what travel benefits your provider offers. So what’s better to use: cash or credit? There is no definitive answer as it actually depends on where you are and what type of purchase you are going to be making. With proper budgeting and using cash and credit in combination responsibly, you’ll stay in good financial shape now and into the future. Leslie Tayne Leslie H. Tayne has more than 15 years' experience in the practice area of consumer and business financial debt-related services. Speaker, Author of Life & Debt, Attorney and Founder of the Tayne Law Group, P.C., Leslie is working towards reshaping the debt industry by offering real, proven solutions to help her clients get back on the road to financial freedom.