When paying for everyday and occasional purchases, some purchases should be paid for with cash, some with a credit card, and others with a debit card. Let’s inspect each method and when you should use them.
When should you use cash?
Some retailers offer discounts for paying in cash, making it the wise go-to. Also, if you have a tough time sticking to your budget when shopping, it’s helpful to only take along the cash you plan to use. Finally, some small businesses only accept cash payments.
On the flip side, cash offers no purchase protection and should not be used for large purchases. Also, cash leaves no paper trail, so it may be difficult to track expenses. Finally, cash always carries the risk of being lost or stolen.
When should you use a credit card?
Credit cards are the double-edged sword of personal finance. Credit card debt is a leading cause of consumer debt. However, owning credit cards and using them responsibly is a crucial part of your credit rating.
Credit cards also offer two primary advantages: rewards and purchase protection. Many credit cards can earn rewards as you spend on them, so it earns you something for your use. The purchase protection a credit card offers also makes it the ideal choice to pay for large purchases. In addition, using a credit card and making on-time payments can help boost your credit score while also making expense tracking easy.
Ideally, credit cards should only cover fixed or steady payments and purchases you know you can pay in full when the bill is due.
When should you use a debit card?
Debit cards allow you to track your spending and help you stay within budget, since you can only spend what you have. In addition, if your card is lost or stolen, you can cancel it and/or close the connected account.
Debit cards can be a great choice for everyday purchases of any kind. However, since they rarely offer rewards or the same level of purchase protection as credit cards, they are not the best choice for large purchases.
Use this guide to help you choose the right payment method in every situation.