Whether to shop with credit cards or cash is always the million dollar question. At least, it is in our house. In today’s digital world, shopping with credit cards is just so much simpler. But in the grand scheme of things, is it the best way to shop for our long term financial wellness?
Shop with Credit Cards
Doing regular shopping, especially with children in tow, can just end up being more of a pain than anything else. So, as most of us try to do, I want to make shopping easier, quicker and less painful. This is where credit cards come into play.
The easiest way to go shopping is with a credit card. Or is it? Of course, it is simple to just swipe your card and move on to the next place. But there are a few things to think about before proceeding with just swiping left and right with your credit card.
Yes, I may be able to rack up some serious reward points on my credit card just by doing regular shopping with it, but at what cost?
The reward points on credit cards are only worth it if you pay your card off every month. If you don’t, then the monthly interest you are paying will be well more than the rewards you are getting. And this is what the credit card companies hope you will be doing. That way they can make some serious money off of you.
I don’t know about you, but I prefer to make money off of the credit card companies instead. Therefore, we make sure to pay off our credit card in full every month, to justify what reward points we are making. In order to do this though, we use mostly cash and just fill in with our credit card for things like:
- Gas (because we don’t want to have to go into the gas station)
- Amazon purchases
- Train fares
- Places that won’t accept cash
This is a great way to shop, even if it can sometimes take longer to pay with cash. This way we know that we have enough to pay off our card each month, because we don’t put much on it. By continuing to use our card regularly, and not using much of the total credit line, it helps increase our credit score. That may not be important to everybody, but we want to keep our credit scores as high as possible in case we need it for some reason. And this is an easy way to help with that.
But if you don’t have the cash flow to pay off your credit card every month, then it would be better for you to pay for everything with strictly cash instead.
Shop with Cash
As always, cash is king, if you happen to have it on hand. And if you don’t, then add it into your budget to take out a certain amount of cash per month.
We talk about our budget once a week to stay on track. That is when we decide if we have enough cash for our necessities for the week, or if we need to get out more cash. Even if you don’t go through your budget, weekly, it is best to do it more than once a month. Especially, if you are trying to stick to a strict budget while paying off debt or reaching a specific financial goal.
I really like the envelope system by Dave Ramsey, because it gives us more control over our spending. This is where you pull out cash and designate it all into separate envelopes to spend for the month. Some of the most common envelope categories are:
Basically, the theory is that we can’t spend what we don’t have in the envelope. Although, I can tell you that I have overspent before. I didn’t want to have to tell the cashier to take some of the groceries off and block the line. So, I whipped out my card and used it for the extra $3 – $10 worth of groceries.
I realize this is cheating the envelope system. But we are okay with using the credit card for those smaller amounts, since we pay it off every month. Either way, the total amount of the receipt goes into our budget spreadsheet. That way we know how much we have left for the month in each category, and plan accordingly.
If I accidentally go over and run out of cash, that means I get less cash out the next week. So it all balances out in the end.
Shop With Credit Cards or Cash?
Credit cards are great for boosting your credit score and getting some great reward points. However, these rewards are ONLY great if you can afford to pay off the balance right away. If you can’t, then continue to use strictly cash until you find yourself in a position to do so. This will help boost your financial wellness and keep yourself out of debt in the process.
Or you can use a combination of both cash and credit cards, like we do. Using mostly cash helps keep us on track with our budget, and rein it in if we are spending too much. By using credit cards for gas and minor purchases, it helps us get some rewards points. Plus it helps boost our credit score, which is a huge bonus for us.
Overall, you have to find the right balance that works for you.
Depending upon your situation, using all cash until you get out of debt may be the best solution for you. Temporarily.
Or, if you have a much higher income than your typical expenses, and are comfortable paying off your card every month, you may be fine with paying for everything with a credit card.
But if you are like us and have a little bit of debt left and some specific financial goals to meet, then a combo of cash and credit may just be the winning ticket. Either way, figure out what works for your best chance at long term financial wellness, and stick with it.
Do you prefer to pay for regular purchases with cash or credit cards? Why?