Cash Or Credit - Which Is Better?

When it comes to how you spend your money, there’s always the age-old debate of cash versus credit. Each has their own pros and cons, but which you decide to use more often should really depend on what you’re buying and your personal financial situation.

Cash is Better When You’re:

• Buying From a Small Business: If you’re making a purchase from a local mom-and-pop shop, cash helps them stay in business since they can’t always afford to pay the fees credit card companies will charge them.
• Buying Something You Might Return: Different stores have different return policies and it does you no favors to return an item only to be stuck with store credit you may never use. If you pay with cash, that money will go right back into your pocket.
• In a High Amount of Debt: If you have medical bills or student loans that still need to be paid off, use cash rather than rack up more debt via a credit card.
• In the Process Of Getting a Mortgage: Lenders look at your credit report to determine the kind of mortgage (if any) they’ll give you. If they see any jumps due to credit card usage, it may prevent you from getting a good interest rate or getting a mortgage at all.
• Sticking to a Budget: Simply put, it’s way easier to spend money when you’re just swiping a piece of plastic than it is when you see dollars physically disappearing from your hand. If you’re trying to spend less, cash is the way to go.

Credit is Better When You’re:

• Earning Cash-back or Points: If you have a credit card that earns you points or cash-back for certain purchases, such as gas or groceries, it may be in your favor to use that card rather than cash since it could save you money later on.
• Earning Flying Miles: In the same regard, if your credit card earns you travel miles and you tend to be on a plane more often than not, forgo cash to save your money on future travels.
• Using Benefits of Specific Cards: Certain credit cards give you perks, such as buying better concert tickets before they go on sale to the public or earning hotel upgrades, so it can be in your favor to use those cards when making purchases.
• Traveling: Travelers are usually at a higher risk for theft, so credit cards offer less of a chance of losing money since they can be canceled in a matter of minutes on a phone and charges can be contested. Once cash is gone, you’ll never get it back.

Need help managing your cash? A financial advisor can help determine what the best option is. At American Investment Planners LLC, we make it a priority to help you prepare for the best financial future possible. From retirement to estate planning, we’re here to help with anything you may need. To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.