Spending Money: Pros and Cons of Different Payment Methods

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Cashless purchases are booming and paperless technology is here to stay, Consumer Reports said, last month. Although some people are happy to go cashless, others still prefer to use checks and cash as their payment method. Whatever payment method you prefer, make sure you have enough budget and funds to pay for your purchase either right away or at the end of the month.

money

Budgeting and managing your money before going on vacation, purchasing items at the store, or eating out will prevent you from spending too much. In case you’ve run out of money and need an instant help, it is also very convenient to apply for same day loans. So, how can you make sure you will not be heavily in debt from your purchases? How safe is it to purchase in different ways? In this article, you will read about the pros and cons of different payment methods and choose which method is best for you.

Cash

It is good and convenient to pay with cash when you are making small purchases e.g. groceries, or if you are running errands. Even better, take a limited amount of money for running errands or shopping to restrict you from making excessive purchases.

Statistics prove that people tend to spend 30 percent less if they pay with cash rather than by credit card. However, this does not apply to big-ticket items, which are better paid by credit card. If you have a large sum of money for a purchase, it makes you more vulnerable, because if you lose cash you will not be able to get it back.

Checks

You may think it is quite old-fashioned to pay with checks now, but people still use them today, especially the older generation. Remember not to overspend because if you overdraw, these charges may be as much as the whole purchase.

Another disadvantage is that your identity can be at risk when using checks as your personal contact details such as address and phone number, as well as your account information appears on your checks.

Credit Card

If your purchases are on a budget and your expenses can be easily repaid when the statement comes, using a credit card can be a good idea. One of the risks with credit cards is getting interest on top of your purchases. It can affect your yearly credit report in a negative way. A good thing is that you are secured from expenses you don’t make when you use a credit card.

If a fraud tries to use your credit card, most companies will protect you from paying any charges and will deliver you a new credit card. Cash-back offers are additional benefits, which can be used on other purchases in the future or for saving money in your emergency fund or bank account. The most important thing about using credit cards is to completely repay the card at the end of the month and use it only for budgeted items.

Debit Card

Using a debit card is convenient as the money comes out of your bank account directly. However, the disadvantage of debit cards is that consumer are not as protected as with credit cards. Debit card holders are not protected from fraud and susceptibility to unauthorized use depends only on how fast the cardholder reports the card stolen or lost.

Prepaid Card

Such type of cards is a great way to help students in high school or college to learn how to spend money responsibly. Putting money on a prepaid card allows the cardholder to only spend a certain amount of funds that are available. However, pay attention to the fine print for any hidden fees or penalties.

Consumer Reports admits that cash may never go away completely, but the number of people relying on cash is diminishing. Technology is marching on, bringing us fingerprint and eye detection, so we don’t even need our phones to buy goods.

Anne Lawson is a British writer who keeps her eye on business and trending issues that affect us all. She loves to delve into the real story and give us interesting tidbits we might otherwise miss.