Dubai: With almost every place easily accepting debit and credit cards, most of us have stopped carrying cash altogether. In fact, most surveys suggest that people usually carry cash only for emergencies and small purchases.
But is that the most cost-effective of solutions? Since cash is accepted everywhere, it is vital to carry some at all times in case of an emergency.
Study proves people spend more money when they use credit or debit cards versus physical cash. So, use cash if you are on a budget as it will keep your spending habits in control.
Certain stores have a lower limit on the purchases you can make with a card. This is when cash is handy. Additionally, small businesses still prefer traditional cash payment, instead of using cards.
When should you use debit cards?
Debit cards have been replacing cash as the most universal mode of payment, as everyday purchases are always more convenient with debit cards.
It offers the convenience of a card and the limitations of cash spending since the money is deducted from the account at the time of purchase.
Since the debit card is directly linked with your bank account, you can only spend the amount of money you have. This ensures that you never go in debt and spend only what you have.
Paying bills on time does not come easy to most. Use of debit cards are preferred for setting automatic bill payments, if you think you will not be able to take care of your bills on time.
Debit cards help manage spending without the hassle of carrying loose cash. If you prefer keeping your pockets light, you should use debit cards for most purchases.
When should you use credit cards?
Although credit cards are a very convenient and easy mode of payment, it is important to make regular bill payments along with interest to avoid a debt pile.
Credit cards are ideal for those who are traveling as it avoids the hassle of carrying cash. Plus, you can also gain added benefits such as air miles, discounted stays and car rentals.
Compared to cash and debit, credit cards offer the best security option as you are not liable to pay fraudulent charges in case the card is lost or stolen and it’s easy to block a credit card.
With the added benefit of not having to worry about carrying money with you credit cards offer the best rewards on certain purchases in the form of discounts, cashback and loyalty points.
You can actually save a decent amount of money by making purchases with your credit cards instead of cash or debit. Moreover, if you are traveling for work and making expenses incurred by the firm, using your cash or debit cards would mean that you will have to spend the money you have on you.
To save that, you can simply use credit cards and submit an expense report to the company, which will then take care of the reimbursement.
So, what the right mix for you?
With perks and rewards, credit cards might sound like a financially sound decision for all your buys — but don’t rule out debit cards and cash yet.
Using credit is also dependent on your ability to live within your means. It’s a question of, are you using credit cards as a secondary income source or a way to take advantage of perks?
As credit card bills have become the biggest source of debt for, particularly millennials, it is important to know what you can and can’t afford before making any purchase.
If you’re using a credit card to live beyond your means, or to pay for everyday purchases because you can’t otherwise afford them, you may be better served using a debit card.
As it is advised to keep cash, debit and credit card handy at all times, and as most of us do, planners advice to not use one payment-mode for all payment types.
While it might range from constantly keeping handy a couple of hundred dirhams in your wallet in a month to maybe say Dh1,000, it differs with your income and expenses.
Using cash has the same financial effects as using a debit card, but with cash you may spend less than you would swiping a card because it’s more tangible.
For some, being restricted to using only cash may be a better approach. If you still want to rack up credit card rewards, be deliberate in the way you use your card.
Perhaps it is a mix of different methods that work for you. You may use cash for buying dinner, but use a credit card for bigger purchases just because it suits your budgeting style better.