Cash versus Credit Card

Why worry when you can buy anything with a credit card?

Some people feel the pleasure of acquiring things even if they don’t need them. There’s the pride of being the first to buy the newest model of a mobile phone, Ipod, or PDA. It comes back to that question again: Is that a need or a want? A want is something you can do without, while a need is something you can’t do without. What cause this impulse to splurge?

There is that illusion that you are not spending real money when you use a credit card. The feeling, however, dies down when the bills come in because bills have to be paid with money – hard-earned money.

Some people fail to realize that when they shop until they drop, they lose control of their finances. When they are overdraft and starts paying, they realize that they are not paying off the loan. They are just paying the interest of the loan.

In addition, when the demand letters come in because of defaults in payment, then trouble starts to mount. They don’t feel good about themselves anymore.

Then, why must you be in this situation? In the first place, why should you be in debt when going into debt can be easily avoided?

It starts when you realize that having a bunch of credit cards determine your social status. It doesn’t. Matter of fact, having a bunch of credit cards is a liability, especially if you lose one or two of them. I’ve seen my friends show me an array of credit cards but don’t have the money to pay for a cup of coffee.

Once you have realized this, then you can limit your spending. Sometimes it is just psychological. If you have credit cards leave them home so you won’t be tempted to use them. Credit cards must only be used during emergencies like when your car broke down or your computer crashes down, or maybe when you have to fix something in the kitchen or the sink.

Limiting spending is living within your budget. Spending the money you have yet to earn leaves you reeling to pay your debt. And when demand for payment comes more often from creditors, there may not be a place to hide. Creditors will find ways to get their money back. They will also lower your creditworthiness, making it difficult for you to apply for loans in the future.

Another way to limit your spending is to cancel options in the credit card that permits you to spend without control.

Cash versus credit card?

The winner is cash. My take is that when you have the cash use it. And when cash is not sufficient for purchase something that you want, there is no harm in postponing the purchase until you have saved enough money to buy it. This doesn’t mean that you don’t use the plastic at all. When you have to use it, exercise prudence.