If you're committed to making good financial decisions, you might avoid credit cards and pay with cash. Using cash is one way to avoid costly debt and maintain a good credit rating, but there are times when it's better to pay with a credit card.
1 Booking a Hotel/car Rental
You might have a vacation fund and plan to finance your entire getaway with cash. But if you're booking a hotel or car rental, you're better off using a credit card. In most cases, a hotel or car rental company places a temporary hold on the card, which could be a couple hundred dollars over your actual cost. If using a debit card, this hold reduces the amount of available funds in your bank account. However, you can use a credit card and keep your cash fluid. Also, some credit card companies include car rental insurance as a perk, so you won't have to purchase this extra insurance at the counter.
2 You Need to Build Credit
If you don't have a credit history, or if you need to rebuild your credit history, cash won't help you. You also can't build credit with a prepaid credit card. You need a credit card, such as a secured credit card. Use the credit card monthly for small purchases and pay off the balance in full. This adds positive activity to your credit report, giving your credit score a boost.
3 You Have a Rewards Credit Card
Sometimes, you need good credit to qualify for a rewards credit card. The fact that a credit card company issues a card to you is a major perk. With these cards, you can earn miles or cashback for every purchase. The more reward points you earn, the more chances you have to redeem points for gift cards, merchandise, statement credit or travel.
4 You Need the Best Price on a Purchase
You might be carrying a card that offers price protection. This is a valuable perk if you want to get the best price. With price protection, if you purchase an item and see the exact item cheaper elsewhere within 90 days, your credit card company may refund the difference. Make sure you keep your receipt as proof of purchase.
5 You're Traveling
It doesn't matter if you're traveling internationally or domestically, it's always safer to have a credit card. Cash can be stolen, and if you lose your cash, it's not replaceable. A credit card on the other hand offers far more protection. You can receive a replacement card, and you're not responsible for unauthorized transactions.
6 Able to Better Track Spending
You can't track spending with cash unless you hold onto your receipt. But as you know, receipts become lost or damaged. If you use a credit card, there's a record of your transactions. You can view your credit card statement to see how much you spent on an item, or view your account online anytime.
7 Option of 0%
Some credit cards offer 0% interest for the first 12 to 18 months. If planning a large purchase but you don't want to spend all your available cash, you could use a 0% interest card and pay zero interest if you pay off the card during the introductory rate period.
Some people only use cash, whereas others only use credit. To each his own. But regardless of what you prefer, there are times when paying with credit makes better sense. How do you prefer to pay, and why?
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