Reduce Expenses When You Use Cash

Whenever people make purchases whether they are necessities or luxuries, people are more likely to use their credit card and people are willing to spend more if they can use their credit card. What people don’t know is when you agree to use your credit card, you are paying more overtime for that item than if you had paid with cash.

What is the reason for people using a credit card?

People want to get the complimentary miles or they want to get cashback. So people assume they are getting more in return when they pay with their credit card. Look at the cashback amount you are getting every month. If you are like me, then regardless of how much you spend, you don’t even get a dollar back every month.

So you are spending more than you normally would for a very small fraction to come back as a reward.

But people very rarely pay attention to the interest that the card adds to payments. That interest would not be a problem if the card was paid off in full every month. Many people stick to paying off the minimum payment which is the worst. If you buy something with a credit card and you don’t pay it off in full, then interest will be generated from what is leftover and increase your bill which will increase your minimum payments over time.

Another problem with credit cards is the companies that charge the cardholder annual fees. If you see through your statement that you have to pay an annual fee just for having the card then you should cancel that card immediately. [READ THAT AGAIN]

When you pay for items with cash, there is a benefit that many people do not know about.

When you pay someone with actual money, it connects with your brain what you spent because you have to hand that money over. When you pay for the same item with a credit card, you are not as aware of what you are spending because you insert or swipe the card, authorize the transaction, and you are charged. There is no separation that you have to deal with at the time of the transaction.

The same is true for debit cards because you’re not handing anything over but you also are not paying interest on what you purchased.

Credit cards do seem like a more convenient way to pay, but regardless of what rewards you think you are getting, you end up paying more than you realize. The rewards offered are also a small fraction that is meant to entice you in spending more than you normally would.

So if you are going to buy groceries, clothes, or luxury items then pay cash and you’ll end up paying less in the long run.