When to Pay Cash and when to use a Credit Card

In the United States, convenience is prized above all else. Credit cards offer that convenience, but at a price you may not be willing to pay.

Credit cards should be used for purchases that you don’t wish to make in cash, period. The whole concept of the credit card was introduced for situations in which carrying large amounts of cash or traveller’s checks was not an option.

For instance, when I went to purchase my first computer, I did not want to carry a couple of thousand dollars in cash with me to the store. So I brought the card, paid for the computer and when the bill came in, I paid it in full. I have used credit cards for emergency car repairs, or for holiday shopping when I was unsure of how much cash to bring. Even so, I had an idea of how much I would spend per person and would not vary from that mark.

It is altogether too easy to overspend when you have a credit card (or more than one) to purchase items you feel you need. In times of economic hardship, the pull to use the cards is almost irresistable. “After all,” you may rationalize, “I’ll pay it when I get a new job/get my tax refund/get my yearly increase.” Or, you may feel angry that others are enjoying a better standard of living than you and say to yourself, “Oh the hell with it. I deserve to go on this cruise, so I’m going. I’ll worry about paying it off little by little later.”

This is the kind of danger that can lead to the common phenomenon of being constantly under the shadow of unresolvable debt.

Before you decide to use a credit card, it is imperative to create a budget for yourself. Be realistic about what you spend and what you earn. Make sure to budget for take-home pay only. When you total up your weekly and monthly expenses, see if you have anything left over. If not, then you have no business using a credit card for anything at all.

If you *do* have left-over cash, do you want to “pay yourself?” Should you start a savings account? Again, here is a situation where you don’t want a credit card tempting you.

This is not to say I have not gotten in serious trouble with credit cards. I have. That’s the reason I am writing this. Hopefully I can keep at least one person from being in the grips of the same vicious cycle in which I found myself.

I was constantly trying to make big payments on my cards, leaving myself too little cash for weekly expenses, and then having to use my credit card for those weekly expenses. I simply did not make enough money to have acquired that debt.

Perhaps you are shaking your head and saying that you have a family to feed, or no income, and the credit card is your only hope of survival. Think again. Get creative. If you are truly that destitute, there are alternatives. Can you borrow from family or friends? Can you go to your church or a local food pantry? If you have children many states offer no-cost or low-cost health insurance for them, along with a host of other social services for which you might be eligible.

The expectations of a certain standard of living in this country have skyrocketed. I myself am currently out of a job and I do not have a credit card. I have cut off my cable, I have no extras on my phone service. I cut off my cellphone, my video rental service, my healthclub monthly fee. I am going to contact the local food pantry for basics. I am going to sell what I can on ebay. Under no circumstances will I use a credit card to buy “essentials.”

It is so very important in this day and age to guard your credit rating. Falling behind in your credit card payments is a sure-fire way to ruin your credit. This can result in your having to pay higher interest rates for large purchases (such as a vehicle) or being denied credit for other things. The most common problem with poor credit arises when someone is trying to purchase a home or condominium. Suddenly every credit mishap you ever made rises up to hinder you realizing your dream.

I think credit cards are best locked in a safe deposit box, and used for certain pre-defined things only.

I’m fond of an old rhyme my Yankee grandparents used:

“Use it up
Wear it out
Make it do
Or do without”

Credit cards are a temptation to trouble you just don’t need.