It seems like everywhere I turn I hear about how awful credit cards are and how no one should use them. There seems to be a growing trend of people thinking credit cards will only bury you in debt and only “rich people” can afford to use credit cards. I notice this growing trend especially with a lot of bloggers and other personal finance websites. These authors say things like: cash is so much easier to use, using cash helps control spending, cash is safer, cash doesn’t accumulate interest…the list goes on. The scary part is that pretty much all of their claims are almost entirely false. Well, I am here to tell you why I never use cash and neither should you!
It seems that we always hear about credit card fraud in the news. News outlets love reporting stories about hackers stealing credit card information from different stores’ databases. It sounds terrible and even frightening knowing that thieves have taken information that can allow them to make unauthorized purchases on people’s credit cards. If only more people used cash! Using cash prevents the risk the of credit card fraud! Well, what we don’t hear about is how almost everyone affected by these (not so common) events don’t pay or lose a single cent. When an event like this occurs the affected credit card accounts are immediately issued new cards, extra fraudulent spending alerts are put in place, and in some extreme cases like the massive Target hack that occurred in 2014, affected consumers were given free credit monitoring services for the next few years just to make sure there were zero residual effects.
What we don’t hear about as often on the news is the constant occurrences of more personal theft that causes more of a headache to people than the rare massive database hackings. If someone were to steal my wallet today they would be severely disappointed. They took all that risk at obtaining it for practically a zero gain. They would find no cash and only an assortment of credit cards. By the time they started using my cards I would have already called my banks and the cards would be useless. Even if they were able to pull off a few transactions, I would never pay those bills as my credit cards all provide zero liability for fraudulent spending. Now what would happen if I only use cash? I’d most likely be carrying a minimum of a couple hundred dollars and I would never see that money again. That money would be gone forever. What bank covers wallet cash theft?
What if I use a credit card on a website that ends up stealing my information and using it for unauthorized purchases? Same scenario: a few quick calls and I would never lose a cent. But what if I used my debit card? More than likely whatever money was spent would never be recovered. Although a debit card is plastic, the money is generally withdrawn immediately from the user’s account opposed to having a credit card issuing bank front the money at no risk to the user. Your entire life savings could potentially be stolen and never recovered if your debit card or number is stolen and used by thieves. You never have to worry about this while using a credit card.
The final “protection” piece with credit cards is travel and other purchase protection. There are many credit cards out there that provide extra (and sometimes hidden) benefits for purchasing things with them. Many travel cards provide various types of travel insurance like car rental insurance, airline ticket insurance if you cancel after you buy, lost luggage insurance, and even sometimes overall health/life insurance while traveling internationally. For non-travel purchases, many cards have benefits for extended warranties and price match services. That television that broke just outside of the manufacturer’s warranty is now covered by your credit card company. That item that went on sale two weeks after you bought it full price now has the difference refunded to you after you showed your credit card company. Cash and debit purchases provide almost none of these in any capacity.
In this day and age it is almost impossible to rent a car, book a flight or hotel room, or make online purchases without a credit card. Granted, some of these things still can be done with a debit card which is still technically using cash, but as time goes on credit cards are becoming the only form of payment for many things. You start limiting your purchasing power when you do not use credit cards (however credit cards should not be an excuse to spend beyond your means).
Another type of opportunity cash cannot get you is getting a good interest rate for a loan or just a loan in general. Eventually there are going to be purchases you cannot make with one lump of cash, mainly a car or a house. At some point you will most likely be in a situation where you need to apply for an auto loan or a mortgage. Even if you do not do any of these, more and more apartment complexes are now doing a soft pull on applicants’ credit scores to get an idea of how likely they will pay their rent and some rental car companies check your credit if you are trying to rent certain types of vehicles. The bottom line is that you will limit yourself in some way at some point in life if you do not effectively build your credit score by doing things like using a credit card responsibly. Someone who always used credit cards and used them responsibility will most likely get a much better interest rate on their loan (and possibly be able to borrow more money) compared to someone who has no or limited credit history. Like it or not, not using credit cards could very well impact future major life purchases.
Spending Control and Analysis
The biggest opponents of credit cards claim that using credit cards as opposed to cash actually increases the likelihood that you will overspend and you will fall quickly in credit card debt. While there might be some truth to this, I argue that if someone lacks the financial discipline to not make purchases on things they cannot afford to pay for at the end of each month, using a credit card or cash won’t really make a difference in the long run. In fact, unless someone who uses cash creates and uses an incredibly comprehensive budget system, they will have a much harder time keeping track of what they are spending money on with cash as opposed to what they spend money on with a credit card. Most credit cards today offer a variety of powerful tools for their users to track spending and get very insightful graphs, charts, and other forms of data to track what their money is being spent on. With a few clicks I am able to get colorful charts to show me what I spent each month with little to no effort on my end since my credit card issuer’s website does all that for me. If I used cash, I would be out of luck and forced to track all of this on my own. I would have to save every receipt and be careful to not to lose any of them before constantly manually entering the data in some boring spreadsheet. What scenario sounds better and more useful to you?
I would be remiss if I did not touch on the cash back advantage credit cards have over using cash to pay for things. Since my entire website is dedicated to getting cash back from credit cards I won’t belabor the point here in this post. Even if your credit card gets you 1% or less cash back, you will always come out ahead. To put it bluntly in one concise sentence: At this point in time with all the different cash back opportunities you are literally losing money if you do not use a credit card for purchases. Why would you not take advantage of getting free money back for purchasing things you would normally purchase anyway?
I am always irritated when the news, bloggers, and other media outlets create this unwarranted fear and disdain for credit cards. Like many things in life, credit cards are tools that take responsibility and discipline. When used correctly they offer a multitude of advantages that cash can never provide. Pay off all your credit card balances in full each month as to not accrue interest and always match the credit card that offers the highest cash back for that particular purchase. If you do those two things at a minimum, credit cards will beat out using cash every single time.
Stop using cash and start using credit cards!