CASH vs DEBIT vs CREDIT CARDS
Cash, Debit, and Credit Cards are all ways to make transactions. Here are some pros and cons between the three ways, along with some insight into my own personal balance.
Cash
Cash comes in handy in places where cards aren’t used. Whether it’s a corner store, paying for a haircut, etc. I always try to keep some cash (like $30–50) on hand.
One downside of cash is that it’s hard to keep track of in the long term since it can’t be automated. If you already have the habit of writing down transactions in a giant ledger like George Washington, all the power to you.
Debit Cards
A debit card is better than cash because it can connect to a personal finance app like Mint, allowing me to automatically track my expenses and stay in line with a budget.
It has the capacity to store large sums of money which is more favorable for large sum transactions. However, the thought process of swiping a card is significantly easier than letting cold hard cash escape from my hands.
Unlike a credit card, I can use a debit card to take cash out of an ATM. While it’s possible to take out cash with a credit card, it’s not ideal since it usually incurs a high fee and reflects poorly on a credit report.
Personally, I use the bank associated with my debit card more for storage than usage. I keep enough money in my checking account to cover my monthly expenses. Its primary usage is to pay off my credit card twice a week and transfer money over to my other various accounts like my; Roth IRA, Robinhood, and Emergency Fund.
Credit Cards
First and foremost, credit cards only have advantages when they’re used responsibly. They have two main benefits over debit cards and cash; building up a credit score and cashback.
The best credit scores are obtained by paying off a statement balance once or twice a month. A credit balance is the amount of money you actually spent with the card and therefore how much you must pay back to the bank.
A credit score yields a variety of advantages because it signals to a lender (credit card company) that you’re responsible. This puts anyone in a better place to apply for a loan or even just a better card in the future with more fruitful rewards.
Cashback is where a percentage of the costs incurred with a credit card is given back to the user. For example, if I spend $300 at the grocery store buying Thanksgiving dinner. My credit card might give me back 3% or $30 from that purchase.
In conclusion, I use my credit card for most of the transactions in my life. This allows me to build up my credit score and also get cashback. I rarely swipe my debit card, using the bank account as a way to store and move money to various accounts online. Cash comes in handy sometimes, and I usually try and make some money out whenever I’m at the bank since ATM costs are ridiculous.
This balance works for me because I’m fairly responsible with my money. While I may slip from time to time, I only buy what I can afford and pay off my credit card twice a month. It’s important to know your own personal habits and goals to develop a balance for yourself. Feel free to let me know about your own personal finance balance in the comments, or ask any relevant questions.
