10 Reasons Why I Prefer Credit Cards Over Cash

By Silicon Valley Blogger. Last updated 22 February 2010. 28 comments

There are a lot of people out there who are very distrustful of credit cards and the companies that offer them, and I can see why that's the case.  With personal debt skyrocketing and conspicuous consumption now heavily frowned upon, many people have been vowing to freeze their cards or intending to feed them to their shredders.

But I have a completely different view of credit cards. My cash back credit cards have only served as positive financial tools for me; in my mind, it's all a matter of how you decide to make use of them.  Although obvious, here are some reminders of how I've been able to truly optimize the use of my cards:

How I've Used My Credit Cards For Maximum Benefit

1. I keep my cards to a minimum.
I've managed my debt successfully because I'm pretty conservative about how I use credit. I keep only a few credit cards around not only to avoid the temptation of using them, but also to keep my finances simple.  The less plastic and credit card accounts I have, the less stuff I have to track, manage and worry about.

2. I pay my balances in full each month.
I only charge purchases on my card that I know I'll be able to pay off completely by the end of the month.  By learning how to make a budget, I've been able to stick to my goal of paying off my credit card monthly bills in full.  By doing so, I'm working towards living below my means, and approaching my finances responsibly.

3. I limit the cards I carry around.
Why does using cash only rock?  Because statistics have shown that by sticking to cash, people end up spending much less than their counterparts who use plastic.  I keep a card and a spare around in my wallet and found that by having fewer things in my purse, it's a surefire way of keeping the lid on my spending!

4. I enjoy the convenience of credit cards.
I don't have much in my wallet, not even cash.  It's virtually empty.  So thanks to the convenience of a few cards, I'm able to go about my day without having to swing by the ATM machines all the time.

5. I maintain a positive relationship with my credit card companies.
I've actually been pleasantly surprised that the credit card companies I do business with have been easy to deal with.  After all the dreadful stories I've read about the tactics these companies impose on their customers, I've come to expect the worst of them.  But none of my fears have ever materialized each time I've had to approach them.  Here are some cases in point:

  • Fee reversals. I've been late with my payments more than once, but each time, the card company has reversed or waived any incurred fees upon my request.
  • APR adjustments. I've known people who have successfully renegotiated their APR rates in the past; it helps that they have clean credit records and have consistently paid their bills on time.

It's possible to have a harmonious relationship with these financial companies, but I suppose a lot of it has to do with playing by their rules.

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6. I track my finances using my credit card statements and reports.
I appreciate the helpful reports offered to me by my credit card companies.  It's just one more way I can properly track my finances.  I've actually found that the reports, statements and tools I receive from these companies have been some of the best in my financial arsenal.

7. I use my card as a buffer between me and the merchants I deal with. 
I've had a few disputes with some merchants, as I'm sure many consumers have had.  But what's great is that I've had the benefit of my credit card company acting as an intermediary between me and those businesses.  And just my luck, the disputes have always been successfully settled!

8. I sign up for the rewards.
Because I don't carry a credit card balance, I've been able to leverage the use of cash back credit cards and other rewards cards really well.  For instance, by using a gas credit card, I'm able to receive cash bonuses, points or additional benefits just by doing something I already do -- filling my fuel tank each week.  But if you struggle with debt, any kind of card -- even the kind that provides rewards -- isn't worth owning. Understanding the rules of the card and knowing how to take advantage of the rewards without incurring fees is crucial.

9. I choose cards that offer a variety of protective services.
What's great about some cards is that they offer other extras such as return guarantees, and price, purchase and warranty protection. So if you've got any issues with the purchases you've made through your card, you have the opportunity to get them resolved via your card company.  If you've paid with cash, you may have fewer options.

10. I build credit with a card.
The easiest way to establish credit is with your credit card.  By using cards responsibly, you'll begin building your credit scores that can help you secure bigger purchases and perform larger transactions in the future.  Before long, you'll be able to qualify for that mortgage!

The subject of credit cards has always been very polarizing. In my case, I'm a lover of cards, and this is because my experiences with them have been purely positive, and downright smooth and easy.  I prefer to view credit cards as simple spending tools to help facilitate my life and my finances, and by doing so, I've never been anything but happy with them.

 

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Guest's picture

Besides without a credit or debit card you cannot buy online.

Thanks,
Nate

Guest's picture
Guest

Actually, you can fund a Paypal account without credit or debit cards, then use that to shop online. Granted, not everyone accepts Paypal, but you can still shop online...

Guest's picture

I've also read about people depositing cash advances into high yield checking account, transferring the cash advance amount to a zero percent interest. They collect interest on the cash advance while they use the money from their savings account to pay down the card. It sounds like they have basically figured out a way to borrow money for free, and earn interest from the borrowed money.

I wouldn't advise this for most people, but I do think there there are some that can benefit from this...I certainly wouldn't do it.

Guest's picture
GTrant

@Adam,

It's called credit card arbitrage and it is a popular game amongst financially savvy creditworthy individuals. I personally profited over $5k in 2008 doing credit card arbitrage on a dozen cards with over $150k in credit limits. Worked like a charm!

As for the original topic I love my credit cards and I charge ever chance I get. When the credit card company gives me 2% back on every transaction I'd be crazy not to take them up on their offer. I really don't think I spend more because I use plastic but The $480 check from American Express last year before Christmas sure was a sweet deal!

Guest's picture

I track my purchases on my credit card, just like any other checking or savings account, on Microsoft Money so that I always know what is my balance. And since I pay off my balances each month, I have been able to leverage the rewards to offset some pricey items that I buy.

For example, I would trade in $20 for a $25 giftcard for Sephora. A $38 primer would end up costing me $14. I would never spend that kind of money on makeup if I have to pay for all of itself, but with my rewards, I can indulge this way.

But this kind of stuff only works for someone who backs off their balances each month.

Guest's picture

This is about using credit cards wisely! Unfortunately, not everyone has the financial fortitude to do this, but I do this myself as well. Paying the bill each month in full, having the cc company fight your battles for you and convenience are great. I try to use cash as well for smaller purchases just so I can keep track of what I am spending. But, hey, if it works for you... no problem.

Guest's picture
Phil Astin

This works fine for probably one to five percent of the population, but unfortunately for the others they don't have enough self control.

Don't get me wrong; I'm in the 95 % group. I know better; I can't trust myself. My Amex card was at a fifty thousand dollar limit and I had them drop it to one thousand because, well again, I don't trust myself. It's too much of a risk that I'm not willing to take because I know it's hard. We are in this economic situation because of easy credit (credit cards, mortgages, & home equity loans / lines of credit) and a lack of self control along with an unhealthy bit of greed.

Some people need to learn how to keep themselves from being tempted by available credit. Cutting up the cards are unfortunately the only option for some of us.

Guest's picture

I agree with Phil about self control. I have yet to benefit from any credit card perks. I am not part of the elite 5% that can consistently pay of my card each month. I am considering getting rid of my credit cards all together once I pay off the last of my debt. I think that it's important to have a savings account for emergencies, and to use debit cards instead of credit cards. Debt cards have the same capabilities of credit cards when it comes to E-commerce and limit you to only spending what you have.

-Dan Malone-

Guest's picture
Jack

I like to use them for the Cash back programs. It's great to save a bit of money that way.

Guest's picture
A

I also use cards for everything and pay it all off each month; the rewards are worth it to me. How I handle temptation is to have a pocket diary and write down every single thing I spend (cash or credit), even if it is $0.25 for a parking meter. Knowing that I will have a permanent (and immediate) record of a purchase makes it easy for me to say, "no thanks" to anything that is not absolutely essential.

Before I started writing everything down, I still paid it all off, but I didn't have the same level of control. Now, I don't even worry about it.

Carlos Portocarrero's picture

All plastic, all the time.

The Writer's Coin  |  Follow me on Twitter

Guest's picture
Wimsey

The Digerati Life has Visa as a site sponsor. Objectivity, anyone?

Silicon Valley Blogger's picture

This is response to Wimsey's comment.

I don't have any direct relationships with credit card companies.  Once in a while, they advertise across several blogs.  At any rate, when I write about card companies, I take the middle ground.  

I've actually also written about how much card companies can be exploitative.  I've written several articles that point out the many problems with credit cards due to their misuse.  But I also see the good they can do when they are used in the appropriate manner. 

In this piece, I chose to write about the positive side of credit cards, just to discuss my personal experience with them, perhaps in response to the negativity a lot of people have on the subject.  There is life after debt, and perspectives change depending on which side of debt you are situated.

SVB @ The Digerati Life

Guest's picture

Great post! This is a guide to responsible credit card use . . .

Guest's picture
Guest

I've always considered my use of credit card a financially smart move. Because I pay in full each month I pay no interest, but my money is earning interest in the bank (admittedly not a lot right now) until the purchase posts to my card, shows up on the bill and reaches the due date.

But I confess to being a pretty frugal person who has never been tempted to buy something just because it was going on the card.

Guest's picture
Diane

Credit cards are not necessarily evil, it is the lack of self-control that makes them bad for some people. You have to know yourself & your own limits & proceed accordingly.

I'm in the 5% who can use credit cards responsibly & pay them off every month, so I do.

I do use 0% offers (for 6, 12, or 18 mos) from Home Depot & Best Buy. I leave balances on those cards only, using their money for free & keeping mine in an interest-earning account, making sure to meet the requirements & pay off the balance before interest kicks in. This is the ONLY way I carry a balance on a credit card.

I never charge anything I can't pay for that month (even the long-term charges). I've always got the money in the bank to pay the balance in full, I just keep my money earning interest & use theirs for free. :-)

I don't have a huge income, so that's not the reason this works for me. I just budget my money and manage my credit well. I live a good life, but there are many things that I WANT and don't have, by choice.

I'm not willing to spend money I don't have to get things I don't need!

Guest's picture

"This works fine for probably one to five percent of the population, but unfortunately for the others they don't have enough self control.

Don't get me wrong; I'm in the 95 % group...."

"...I am not part of the elite 5% that can consistently pay of my card each month...."

Both of you are fooling yourselves and spreading misrepresentation about the "elite 5%". It's more like the majority of people. According to a Gallup poll from last year 43% pay off their balance always and another 17% pay off their balance usually every month.

That leaves Phil and Dan in, you guessed it, the minority!

Next time you try to justify your irresponsibility by stating you're not one of the "elite 5%" make sure you check for references on the matter.

Guest's picture
Horlic

Yeah!!! Certainly, if you can control your self and you may enjoy more benefit compare to non-credit cards holders. But bear in mind; do choose credit card where best match to your life style.

Guest's picture
No Credit Cards Please

Tried getting a lower rate lately? Probably not going to happen. I've been a loyal, responsible carrier of a certain credit card (to the tune of 16 years or more) and they recently sent me a "change in terms" letter that added a minimum of 8.99% to my rate. No explanation why, just "times are tough." That is even after I called to talk to customer service about the issue.
Personally, I don't like to play games in which the rules can change for the opponent at any time they see fit to change the rules. As Dave Ramsey puts it, if you play with snakes, you're likely to get bitten.

Guest's picture
t

I don't have a credit card, and will never have one ever again. Why? Cuz, I lost control? No, it's because debt = risk. I never had an issue in the past with CCs other than waking up one day saying, "Huh! Why don't I just not stop spending for a month and simply get ahead of my spending and not pay a balance off ever again?" Keep playing the game long enough and one day, if life throws you a curve-ball, there you are, with a balance that you can't afford.

It's just simpler to pay for stuff, you know, with money. I don't have a balance to pay off each month. I don't need a balance. The only real reason to have a balance at all is because you don't have the cash. Cash back? Points? I get points because I am forced to use my company's CC for work. Are those points incentive for me to get a CC if I didn't work for them? Nope. Credit card arbitrage? Maybe a fun hobby, but it is a bit like playing with fire... and a lot of twiddly work for little gain.

Tracking your spending? Use a debit card. Works just as well.

-t

Guest's picture
Guest

For the record...I love my mileage card, but do not be confused that the credit card companies "reward" you. This benefit cost is passed along to the merchant, ultimately raising yours and my cost of goods and services, so in essence we all are paying for the perks. It is the cash users that pay more and get nada. Business card rewards are the worst and merchants end up paying up to 1% more than a non reward cards.

Badger

Julie Rains's picture

Would I rather companies dispensed with rewards programs, sales, incentives, etc., etc. in favor of one low price -- yes! But until that happens, it does pay to pay attention to how certain programs work and if possible use them carefully to your advantage if it fits with the way you like doing business. I am a heavy cc user also -- yesterday, I cashed in points to get a $500 credit on my husband's cc bill and ordered a back-up device for my computer paid for with a gift card from my cc program.

Guest's picture
Curt

1. expansion of credit is the source of the financial crisis, why expand it more?
2. the average person spends 18% more then with cash
3. increase risk of identity theft
4. they are more work to manage then they are worth
5. rewards are a trick to get you to spend more (and it works)
6. easy to get behind on
7. easy to make a quick bad decision
8. harder to keep track off then a checkbook, because you have to either collect receits or wait for the month statement or syn with the online budgeting software - which is a big investment of time to figure out and usually hard to customize
9. add another monthly bill to worry about
10. fast track to debt, which is financial slavery, not financial freedom

Guest's picture
Guest

Statistics prove card users spend more when paying with plastic over cash.

Guest's picture
Guest

Terrific article on wise credit card use. I have been charging and paying in full every month for many years. My husband and I haven't really paid for airfare for years also. One thing I don't like about the credit score system is that if you charge alot on your cards (and we do - run business expenses through them), the balance can look high on your credit score. There is no provision in the credit score system to note that the balance is paid off every month.

Guest's picture
Jer

And canceling my accounts. With the government taking over the banks, privacy will soon be dead when it comes to banking. I don't trust those "safety deposit boxes" either. Back in the 1930's my grandfather had a bunch of gold coins in his when that thief FDR ordered the confiscation of it all and they paid out less than it was worth. I would recommend getting all your valuables out of safety deposit boxes and finding other places to keep and hide your stuff.

If you got bills every month, having a checking account is ok, but don't leave all your money in there. Get it out and either put it in a savings account in another bank or just cash it out. My checking account usually have enough to pay all my bills and an extra $20. Otherwise, I cash out the rest of my pay check and pay cash for everything because I don't want the government to know what my shopping habits are.

But imagine the possibilities of a government owned and run banking system. There are some politically incorrect businesses out there, like Wal-Mart. Imagine if the Obama admin were able to strong arm banks in to limiting the number of payments to Wal-Mart, McDonalds and other places the liberals don't like. And the reason they'd do that is in the name of fairness and force people to shop at a bunch of other stores in a given time period, like a month. Then when they worry people are going to Wal-Mart and paying cash, they'll get rid of cash completely and force everyone to use cards/checks thus ending financial privacy forever and opening up the entire country to ID thieves and government snooping.

Guest's picture

Reason No. 11: Online transactions.

Guest's picture
Kathy

Never knew there was a name for taking the 0% cash advances and depositing it in your account for interest. I did it for many years when the interest paid was higher and the transaction fees low or nothing. However, even I cant make it worth-while any longer. The cash advance fees have gone sky high, and the interest the banks pay on deposits is negligible. However, one year, about 5-6 years ago I made an extra $5500 dollars doing just that. It paid for a nice vacation for my daughter and I. I use credit cards to pay for everyhing that I can no matter how small the purchase. Just last week got a check for $125 as a reward and put it towards a plane ticket. College tuition, large appliance purchases and just about everything else gives me 1% cash back and I am very happy. I pay the balance off each month, and actually subtract the amount I spend for each credit card transaction from my checking account balance immediately, and thus never over-spend. Havent paid a penny in credit card fees or interest in over 20 years. I know this isnt possible for everyone to do, but for those of us who are diciplned enough, its a source of some extra spending money that we dont have to work an hour for. As for the rest of you who say they cant control their spending if they use a credit card, that just an excuse for continuing to overspend, which you probably will do whether you use plastic or not.