Cash, Credit, or Debit?

With inflation steadily increasing and affecting our daily lives, it’s crucial to make your money work for you and use the right payment method for all your transactions. There’s a time and place for everything, including cash, credit cards, and debit cards. Depending on your lifestyle and the purchases you’re making, there’s ways to make sure you’re using the right payment method.  

When should you be using cash? 

Many consumers have drifted away from utilizing cash, keeping it on hand, and choosing it over other payment methods. Cash can, however, be beneficial to have on hand for situations where cards may require a fee, aren’t accepted, or require a minimum purchase amount. Some small businesses and restaurants can charge a card fee or simply not accept cards at all, in which case cash would be most handy. At many gas stations, the price per gallon may be cheaper when paying with cash, up to 10₡ per gallon. In a time where gas prices are absurdly high, these small savings can really add up at the end of the month.  

Shopping with cash has its pros and cons when it comes to tracking how much you are spending. For some, taking a handful of cash can be the best way to limit your spending by only allowing yourself to spend the amount you have on hand. On the flip side, cash does not have a paper trail, therefore you must really pay attention to what you are buying and how much it is costing you.  

When should you use your credit cards?  

Credit cards are truly the double-edged sword of personal finance, they can be insanely tempting and lead to debt or it can help build your financial wellbeing. Responsible credit card usage offers purchase protection, rewards/benefits, and a better credit score. For recurring bills or fees, such as utilities or subscription services, credit cards are perfect as they can help you earn cash back, airline miles, or other rewards. The purchase protection a credit card offers is a great reason to use it for large purchases, purchases from an unfamiliar seller, or upcoming expenses. Ideally, credit cards should only be used for fixed or steady payments and purchases you can pay off in full when the bill is due. A good rule of thumb is if you cannot afford the purchase in cash at that time or within a few weeks, it may not be a good idea to swipe the credit card.  Always remember, paying with a credit card works best when payments are made on time, no interest is accrued, and rewards/benefits are earned.  

When should you use your debit cards?  

Many consider debit cards to be the cash equivalent of a credit card, offering the best of both worlds. You can track your spending, review your statements, and spend only what you have. Debit cards minimize the risk of debt and offer protection in the event the card gets lost or stolen. However, one of the main downsides is the lack of rewards you could be earning with a credit card. We suggest using your debit card for small everyday purchases like the coffee run, a small grocery trip, a takeout lunch, etc. Try not to use your debit card for large purchases as you may not earn any rewards or have full purchase protection.