When it comes to choosing between cash and credit card, choices depend on individual circumstances. Who have faced difficulty paying off credit card bills prefer using cash, however, others prefer credit cards. What if you do not have cash and you need it urgently? Of course, you have left with only one choice. However, people do not use credit cards only in case of cash shortfalls. They also use it for shopping. Both options show different effect on your finances.
The use of credit card
Many people like credit cards as they are easier to manage than cash. You just have to swipe it and payment is done. You are free from stress of theft and all. However, there are many factors you should consider while swiping it at one store and the other. Of course, you can get some reward points on your credit card, but have you ever considered the total cost?
The reward points are worth it only when you pay off every month. Otherwise, the monthly interest will be more than the reward points. Coming onto swiping it when an unexpected expenditure has popped up, you are supposed to pay off the bill as quickly as possible. The interest rate on credit card deal spirals up very quickly if you do not pay back the whole of the amount within the grace period. However, do remember that not all transactions have grace period, which means you cannot avoid interest at all. If you make a cash advance, every day interest will be charged.
When you use your credit card, you should be very careful with terms and conditions of credit card issuer. Try to avoid making a cash advance and make any transaction that does not allow for a grace period.
Many people use credit cards whenever they face cash shortfalls, but this unfortunately leads to nothing but adding up the debt. A large number of borrowers quickly max it out resulting poor credit rating.
Is there any other alternative?
Yes, you should take out 12 month loans with no credit check. Even if you need a small amount of money, a credit card can cost you more than an instalment loan. These loans aim at helping you tide over during emergency, which is why you can access funds the same day when you put in the loan application. Instalment loans are more manageable as you will pay off the debt in equal monthly instalments. These loans require a soft credit check that means your credit score will not go down and no hard inquiries will show up on your credit report.
A reliable direct lender like London Loan Bank will sign off on your loan application after perusing your bank statement to get the idea of how much amount you will be able to pay back. One of the biggest advantages of these loans is that the lender will disburse money based on your affordability. Further, these loans can help you improve your credit rating as you are to pay off the loan over an extended period. If you pay down each instalment on time, your credit rating will go up provided the lender informs credit reference agencies of your timely payments.
The use of cash
Cash is the most convenient way to make any purchase, but many people do not have cash management skills. They spend money like water, and at the end of the month, they find empty pockets. If you want to get hold of your finances, you should create a budget. It will help you have a clear idea of your total monthly expenses as well as monthly income. You will be able to cut down on discretionary expenses to save more. The rule of thumb says that you should set aside at least 10% of your monthly income for a rainy day.
The biggest advantage of cash transactions is you do not have to pay interest. When you use your credit card, not only you pay off what you owe but also you pay interest. It strains on your budget causing you with shortage of cash.
The bottom line
Financial experts suggest that you should neither discourage the use of credit card nor rely on them for every transaction. Instead, you should use both cash and credit card. Give priority to cash as this will not put additional strain on your pocket. Make a budget every month and keep tabs on your spending to know where and how much money is going out. Use credit card for only those transactions that have a grace period. In case you need money during emergency, you should take out instalment loans. They do not come with burden of paying back in lump sum and unless you manage all of your dues, you should avoid using your credit card.