Before choosing between cash or debit or credit card as a better spending option for yourself, understand your spending pattern. Where and how your money gets spent?
If you tend to visit places where card is easily acceptable, you could choose cash and vice versa. The rationale is to make your spending a little inconvenient for yourself. Unusual, isn’t it? Yes, but it helps you spend ‘less’ comparatively. Recall the last time you left something at a store, just because the store wasn’t accepting cards and you weren’t carrying enough cash to complete your purchase.
Let us first understand cash as a spending option. Most importantly, cash always has an upper hand in case of emergencies, be it small or big. It is accepted everywhere, in all situations, hence, it is advisable to keep a little cash in your car, a secret pocket in your wallet or purse, your drawer at your workplace and your home. Life is full of uncertainties at every step and cash in many times can prove to be your best friend in such situation, a recent example being, the sudden lockdown due to COVID-19.
Psychologically, seeing cash go out of our pocket / wallet send our brain to a self defense mode, subconsciously making us feel a little insecure, because of a tangible resource going out of hand which till that moment was providing mental safety and comfort.
Cash could be a good option when going out for shopping, per say. Spending in cash makes us more conscious about our purchases. This holds true when purchase is being done at a physical store.
Let’s have a look at cards now, be it debit or credit. Cards bring along a great deal of convenience, which cannot be ruled out. It is not easy to carry cash. Heavy wallets or heavy hearts, none like it, right? Similarly, card is that friend of yours which never lets it get heavy on you, and also provides safety at the same time.
Card is a great option to pay for utilities, as the expenses are fixed but card provides the comfort of convenience. Secondly, the benefit of spending through card is also about being able to take the benefit of deals available online. In certain situations such as travelling, spending through card could be very useful. It keeps you away from the worries that come with cash. You may carry a little cash with you to take care of petty expenses, and the rest could be done through card.
Now comes the question, credit or debit card? Always have a credit card. In case of an emergency, like a medical emergency, major car or house repairs or sudden travel etc., dealing with such situations becomes the priority to minimize any further damage. And credit card does its duty here, well. Another reason to use a credit card to pay for utilities-- Understand, you have necessities to take care of, be it groceries, utility bills and fuel etc. the idea here is to pay the same through your credit card, irrespective of the cash or bank balance you hold. After making the purchase with your credit card, simply transfer the money from your bank account to your credit card. This will help you earn a good credit score and will help you in applying for a loan in future.
In the end I would suggest to choose the best of both the worlds. Use both cash and card keeping in mind the kind of situation. But never use your credit card to the extent of having to pay interest. It is also advisable to keep a separate account for savings and spending. Your disposable income should be kept in a separate bank account than the account where you keep your savings. The basic idea is to use your money responsibly.