28 Aug The Case for Cash
Although three out of four Americans report owning at least one credit card, this trend may be declining. Millennials are increasingly choosing cash over a card and many older Americans are following suit as the rate of credit card debt skyrockets. Better count those Benjamins: here are five significant benefits of paying with cash.
When paying with cash, it is impossible to spend above your means. Psychologically, handing over a $20 bill feels like a greater financial loss than swiping your card for the same amount. Since you can’t watch your wallet shrink, it is easy for purchases to pile up from small charges over time. Cash also makes budgeting easier, especially if you use the envelope system. This budgeting strategy divides your monthly expenditures into categories like groceries, utilities, gas, and other significant expenses. Decide on the budget for each category, and then withdraw that amount from your bank after every paycheck. The envelope system relies on cash and is relatively easy.
Help small businesses
Paying with cash helps small business owners who are charged a fee for every credit card transaction. The added cost has led many family-owned businesses to require a minimum purchase of $5 or more for credit cards. In a mutually-beneficial arrangement, some mom-and-pop shops will offer a 2 or 3% discount to customers with cash. Additionally, gas is often ten or more cents cheaper when you pay with cash instead of a card. Even if you keep your credit card for its rewards program, shop savvy and use cash whenever a discount is offered.
Protect your identity
Ever get a call from your bank about a fraudulent transaction? At least 41 million Americans have fallen victim to identity theft, and almost half of all worldwide credit card theft occurs in the U.S. Although regularly checking your account and keeping track of purchases will help you manage that risk, cash transactions are the best way to protect your identity. Scammers and thieves can not only steal your card’s number but also access any personal information stored on a company database. Paper transactions are untraceable and safe, as well as convenient once you get in the habit of carrying cash.
As previously discussed, it’s dangerously easy to spend above your budget when all you have to do is swipe and sign. However, credit card debt is a catastrophe for your credit score and your personal finances. The average American owes $15,000 in credit card debt, and the cycle perpetuates as you use one card to try to pay off the other. Committing to using paper instead of plastic is one of the easiest ways to stay out of debt and manage your money wisely.
No more interest rates, overdrafts, or late fees
Many cards charge a high-interest rate, meaning that you’ll have to pay extra for every item you purchase. Even worse, a late payment can make your interest rate leap to nearly 30%. If you still prefer plastic over paper, be sure to carefully check read the fine print before signing up for any card. Both credit and debit card users have experienced the burden of overdraft fees, but it’s impossible to spend more cash than what you have in hand. Cash purchases promise freedom from the high cost of credit card mistakes.
The Bank of the Lowcountry offers a range of full-service options for both personal and business accounts.