You are crushing so bad on that gorgeous leather jacket but it is the end of the month and pocket is really tight, and oh look the sale is about to end too. That is the time where credit cards seem like a godsend. A credit card can be a boon or bane for you, completely decisive on the skills and knowledge of the handler. On the other hand is the conventional cash that has always been with you. Many people still face the dilemma of choosing cash or credit when money matters are involved. A good deal of people even now have trust issues when credit cards come into picture.

Why cash?

When on a budget: When you are on a budget but a high roller, it is expedient to follow a strict cash only diet. Withdraw a fixed amount of money from the ATM every week, carry it with you, and stop spending when you’re out of cash.

Vendor compatibility: Many vendors do not keep POS machines to charge you on your credit cards. There you need to make necessary monetary transactions in cash only. For example local departmental stores, stationary shops, farmer’s market, food stalls etc.

To avoid unnecessary fees: At some portals paying with credit cards charge you some processing fees which is not worth the cost, so for those areas use cash to avoid that unreasonable cost.
When you are already in debt: When you are already in a debt it is not preferable to use credit cards, non-payment of credit card bills levy a huge interest on you which will further drown you in debt.

Why credit cards?

Reward points: Many credit cards offer reward points whenever you use your card. You can use these reward points for discounts, free products, offers etc. Many credit card companies also provide travel miles and cash backs, you can use these miles for free air travel.

Purchase protection: A credit card can be a great way to protect a major purchase. Many card issuers offer purchase protection and an extended warranty for items bought with the card.

Emergency: Credit cards are a saviour when in dire need of something and you do not have cash or it is above the amount you have. It is not to encourage you to spend irrationally but sometimes credit cards help you to buy something that you cannot afford at that particular moment or you run out of cash.

Improve you credit score: When you apply for a loan anytime in future, you need to provide a good credit score. Not using credit card can dramatically hurt your credit score. Your credit score is mostly based on your credit history and how you utilise credit. If you don’t have a history and don’t use credit on a regular basis, there is nothing to base a score on, so your credit score will be pretty low. And banks will hit you with a much higher interest rate on loans or mortgages if your credit score is low. Pay your bills on time and do not procrastinate.

Credit Card vs Cash

Convenience: It is not fitting carrying wads of cash in your pockets whenever you go out. Credit cards are hassle free, occupy no space and save you the time and energy to count change and calculate every time you make a purchase.

Security: Cash once stolen is gone, there is no recovery and no guarantee to see that money again. Although credit card is just plastic and it is more likely to get lost or stolen but if it gets stolen you can call your bank and block the card immediately before any unwanted transaction happens.

Additional fees: Cash do not come with any additional charges, whereas credit cards may cost you more if not used sensibly. Some credit cards may come with a good annual fee. Pay your bills on time and do not get into a habit of paying just the minimum due otherwise credit cards are just another burden on your bank accounts.

Acceptability: Cash is accepted everywhere, but India has a long way to go where credit cards are also welcomed at every brick and mortar place.

Perks: If used responsibly and by acting smart you can avail all the offers and discounts associated with your credit card and save much more on your future expenditure.

You need to take a call when and how to use cash or credit cards based on your lifestyle and daily habits. Both the payment methods hold individual importance depending on how and where you are going to spend your money. Choose wisely.