Have you ever been confused about whether you should use cash or your credit card to make a payment? Many credit cardholders get confused which mode of payment to choose when the time to pay arrives. While using cash to pay your bills have some advantages, there are several good reasons to use your credit card. If you are someone who is tempted to use your credit card and struggle to clear the total due amount when the bill is generated, it is wise to stick to cash. However, if you are someone who can control your spending habits and pay off your credit card balance at the end of every month, credit cards can offer excellent benefits. If you are wondering why you should choose to pay your bills using your credit card and not cash, read on.
Credit card versus cash
Using your credit card to make payments offers several benefits. Some of the reasons why you should use your credit card instead of cash are:
- Credit cards help you track your expenses: When you use your credit card, all your transactions are tracked. You will receive a credit card statement at the end of every billing cycle (Monthly) and all the transactions you made using the card will be listed. This will help you track your expenses and understand your spending habits better. If need be, you can trim the expenses in the next billing cycle. For example, if your credit card statements indicate that you have high dining bills in a particular billing cycle, you can concentrate on reducing your dining bills in the next cycle. You can avoid eating out and have a home cooked meal instead.
- You can earn reward points on certain credit card transactions: Many credit cards come with an excellent reward program. Based on the type of card you own, you will earn reward points on certain transactions. The reward points can be in the form of miles, points, or cashback. Most credit card providers have a specific catalog where you can buy products using the accumulated reward points. A few credit cards also allow you to convert your reward points into cash and adjust it towards your credit card balance. Most credit cards also come with fuel surcharge waiver feature which allows you to save on your fuel bills. You will not enjoy this benefit if you use cash to pay your bills.
- Using your credit card is convenient and safe: Gone are the days where people used to withdraw cash and carry it around to pay bills. Most people prefer using plastic money these days as they are safe and convenient to carry around. You do not have to worry about losing your wallet and even if you do, most credit cards come with Zero Liability feature which protects you in case of theft or fraudulent activities.
- You can finance purchases using your credit card: Not everyone can afford to buy an expensive item using cash. Credit cards allow you to purchase an item which may be more than the cash you currently have. You can also convert this transaction into EMIs and pay every month. While it is always recommended to pay your credit card dues in full every month, having a credit card will help you during financial emergencies where cash isn’t an ideal option.
- Credit cards, unlike cash, help build good credit: When you use cash to pay all your bills, you will not be able to build your credit score. However, using credit cards and paying your bills on time will help you build a good credit history. Your credit score is computed by how well you use your credit. Any line of credit such as credit cards, personal loans, home loans, or auto loans has a great impact on your credit score. Using your credit card, the right way will help you increase your credit score. However, if you do not use your card wisely, it has the potential to hurt your credit score.
- Zero Liability and insurance benefit: As mentioned earlier, most credit cards come with in-built zero liability feature and insurance benefits. The zero liability feature on your credit card protects you in case of loss of card or identity theft. This feature also makes sure that you are not held responsible for fraudulent transactions made a few hours before you report the loss of your card. The terms and conditions differ from one card to another. Most credit cards also come with personal accidental death and other insurance benefits which protects your loved ones in case of an eventuality.
- Credit shield: A few credit cards also come with the credit shield feature where the in case of accidental death of the primary cardholder, the outstanding due amount on the card up to a stipulated limit will be waived. This will make sure that the family and loved ones are not burdened by debt in case of an eventuality.
- Discounts and offers: Most credit cards are exclusively designed to offer discounts and cashback on certain transactions. Based on the type of card you own you might be eligible to get a discount on your dining bills, movie tickets, or on your lifestyle purchases. Know the offers available on your credit card by from to time and use them to your benefit. You will not be eligible to receive this benefit if you pay by cash.
End of the day, the decision is yours. You can choose to pay by cash or credit card depending on your financial situation. As mentioned earlier refrain from using your credit card to make purchases if you are someone who struggles to clear your credit card dues. However, if you are financially disciplined, you can use your card and clear the total outstanding dues every month and boost your credit score. While it is very easy to overuse your card to accumulate more reward points and gain other benefits, it is important to not get excited and calculate if the benefits you get using your credit card is beneficial to you.