Cash or credit?

When should you use cash and when should you use credit?


Although many payment choices come down to personal preference for certain types of purchases, it’s better to make a conscious choice. Ask yourself a few questions about the payment and funding method:

Do I have enough cash to cover this?

Cash is real and immediate. When you use cash for purchases, there are no approvals required or interest charged. But when it comes to paying for big-ticket items like cars, houses, computers, and college tuition, few people have enough funds on hand to pay in cash.

With most credit cards, as long as you pay back the full balance within the 25-30 day “grace period,” you won’t have to pay interest.

Will I have the cash soon?

Using a credit card can give you extra time before you have to pay for what you purchase. The risk in using credit is that it can be easy to purchase more than you can pay off each month, allowing interest charges to accrue. If you run up a high credit card balance, the interest can start adding up and your debt start increasing.

What other funding options do I have?

Loans and lines of credit can be useful when you have an opportunity to purchase a big-ticket item that will benefit you for years to come. Some situations to consider using credit include buying a car, or eventually, a home.

Whether you want to earn rewards or build credit, find out what credit card is right for you.