When to Pay Cash and when to use a Credit Card

Here in Australia our credit card debt has surpassed our general population’s total income by some unbelieveable amount. I can’t remember the exact figures, but when I heard the numbers, I remember they made me feel ill.
Surely in our well informed, info rich society we should be smart enough not to get ourselves into ever increasing debt. It seems not. And as we move closer and closer to a totally cashless society it only seems to be getting worse.
These are a few tips I have learnt over the years (mostly the hard way) about when to and when not to use your credit card.

*If you can pay cash. Pay cash.

* Don’t use your card over the internet. No matter how secure the site claims to be, theres always some smart little hacker out there somewhere just hacking away. Ring the compay direct and talk to a real person if you can. Contact them by e-mail and organize to send a money order/postal note or bank cheque. If you must use your card, do it through Paypal(PayMate in Australia), because not only does it make the transaction easier to trace if something does go wrong, but they also offer buyer protection in case there are other problems between sellers and buyers.

*Save the credit card for emergencies.
One example- A few months ago our car broke down. We needed it to get to work/school/do the shopping etc right then and there, but did not have the cash on hand. We used the credit card. However we did pay it off over the next four weeks BEFORE the 55 day interset free period was over.

* If you can’t pay it off in 3 or four paydays, then you can’t afford it. After this period of time, you pay through the nose in interest. I have yet to find a credit card that doesn’t. (Although I am based in Australia,other countries may find things different).

* If you are overseas- credit cards are convienient. If you lose them or they get stolen, you can quickly cancell them and most companies will offer insurance for travellers in case this happens. If you have cash and it gets lost or stolen, then it’s gone.

* If you are trying to establish a credit rating- it seems stupid that you have to have credit to get credit. But the companies that are going to lend you the money for that house or car want to know that you will pay it back.They don’t want you to have a debt, but they want to see that you’ve had one and paid it back. One trick is to put your entire pay into your credit card account for a few months and then spend this amount ONLY to do your usual transactions for the month(groceries, gas bill and the like). You do have to be very very disciplined when doing this. Not reccommended for shopaholics.

*If you think you would be to tempeted with a credit card but do not want to carry cash(If you live in a high crime area, are going travelling etc) get a debit card. They work the same as a credit card but you can only use what you have put in the account. Kind of like a pre-paid phone card.

*Anything under one hundred dollars is just not worth racking the interest up on as far as I’m concerned. But you can set whatever limit you like.
In short, use your common sense and always remember that if you choose to pay with a credit card you will have to pay it back sometime.