Is it Better to Pay Using Cash or Credit Card?

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According to some people, credit cards are of the devil. Freeze your credit card in a block of ice and all your financial problems will disappear, they say.

Actually, saying credit cards are bad is insisting chocolate or wine is evil. They’re only detrimental to you status if you have zero self control.

In fact, for someone who pays their bills in full every month and gets annual fees waived, credit cards do zero harm, and come with a bunch of benefits.

The easiest way to make sure your bills get paid and you never have to go, “oops, I forgot”? Pay all your bills by interbank GIRO. It’s easy to set up—just download the interbank GIRO form for the bank issuing your credit card, fill it in and post it to them.

Now that we’ve gotten that out of the way, here are the benefits of using credit cards to pay for everything.

 

Pros

Benefits like cashback, rewards points, frequent flyer miles and discounts

This is by far the biggest reason to pay using your cards rather than cash.

To make it attractive for you to pay by card when you’ve already got a wad of cash sitting in your wallet, credit card issuers offer all sorts of perks in the form of cash back, rewards points, frequent flyer miles, discounts at certain merchants and so on.

Example: With the Bank of China Shop! Card, you get $60 cash rebate when you buy a $1,000 air ticket online. Don’t know about you, but I’m not one to say no to free cash.

That being said, not all cards are created equal, and it’s important to make sure you get the card that matches your lifestyle expenditure, if not you’re just not going to fully benefit from what it can offer. That might sound like a hassle, but you can do it easily with MoneySmart’s Credit Card Comparison site.

 

You might get your money back if you get into a dispute with a merchant

Banks don’t want you to know this, but you can demand a chargeback if you get into a dispute with a merchant.

How does this work? Let’s say you bought something online but it was never delivered, or your purchase wasn’t what the merchant described. You can then file a chargeback. The bank will either accept or reject (and if they do, ask why) your application.

If the bank accepts, they’ll take it up with the merchant and argue amongst themselves. If they win, you don’t have to pay the charges.

 

You don’t have to risk carrying around large amounts of cash

Granted, Singapore isn’t exactly JB and the chances that you’ll get mugged while withdrawing $20 at the ATM are a lot lower here.

But still, it’s a lot better to able to pay for your new laptop using your credit card than having to withdraw 30 $50 notes at the ATM machine and then looking over your shoulder every three steps as you make your way to Sim Lim.

In addition, taking your credit card with you on holiday (or to JB) also means you don’t have to carry around huge wads of cash.

 

Your spending is recorded in your credit card statements

Keeping track of your spending is essential if your financial situation is less than ideal and you want to figure out where you can make changes.

There’s no point in telling yourself you need to “spend less” when you have no idea what you’re really spending on every month.

Paying for most of your expenses by credit card enables you to receive, in the form of your credit card statements, a not-so-gentle reminder of the fact that you bought $800 worth of Topshop clothes or spent your entire year-end bonus on alcohol.

 

If you want to return a product but threw away the receipt, you can use your credit card statement

You’ve probably experienced that sinking feeling when you realised you threw out all your receipts while cleaning out your wallet the day before, and then discovered the new drone you bought was defective and wouldn’t fly.

Well, guess what, all is not lost, as credit card statements count as receipts too. If you use your credit card to pay for everything, you can save yourself from quite a few panic attacks.

 

Speed and convenience

Remember glaring at the auntie in front of you at Fairprice because she decided to pay for her $80 grocery bill in 50 cent coins?

When you pay by credit card, that will never be you. In fact, now that more and more merchants have now adopted Visa payWave, you can often skip the signature bit and just tap your card like you do with your Ezlink card.

 

Cons

Nothing in this world is perfect. Even Megan Fox probably has a sixth toe or something. While paying by credit card comes with many benefits, there are of course a few little disadvantages you might too.

 

Annual fees

The most regularly annoying factor about paying by credit card is being asked to pay annual fees. The majority of banks will let you waive your fees if you call in and ask nicely, and if they don’t you can always cancel the card.

However, the problem is that they don’t inform you when you are being charged the annual fees. The amount is just sneakily tacked onto your bill and if you’re not careful you’ll end up paying it without realising it.

To avoid paying annual fees, always check your bills when you’re approaching the month in which you originally applied for the card so you can immediately call the bank to ask for a waiver.

 

Other fees

Credit cards enable you to buy stuff online in foreign currency, or go on holiday without having to hire a bodyguard to protect your suitcase full of cash.

You will, however, be charged currency exchange and transaction fees that can raise the cost of your purchase by 2++% to 3++%.

 

High interest rates

If you pay your bills in full every month, you don’t get charged any interest. But if you don’t, you usually get charged over 25% (ouch!) in interest on every cent you roll over to the next month. That’s why it’s so important to automate your credit card bill payments.

 

Risk of identity theft

Credit cards can be dangerous in the wrong hands. Get your credit card stolen or skimmed and you could find yourself paying for some guy’s new home entertainment system.

That’s why it’s important to check your statements. If you spot any suspicious activity, you have the right to dispute the charge. When the bank finds out it wasn’t you who spent that money, you won’t be made to pay it.

Do you prefer to pay using cash or credit card? Tell us in the comments!

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.