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Credit Cards -
Cash Vs Credit Cards
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It seems that many more of us are returning to the more traditional method of paying by cash for our purchases. We are rejecting the ever-popular card payments and getting out the cash for many transactions.
Where cash and credit cards received a similar amount of use last year, 60% of purchases are now made with cash. When measured by value, credit cards still dominate by far, but have dropped in popularity. It seems that credit cards are still the most popular option for larger transactions, although usage has fallen. Whereas 32% of spending last year was cash, it has now risen to 34%.
The current economic climate and emphasis on the dangers of debt are likely contributors to this reluctance to use credit cards. The economic slowdown which has been extensively covered in the press has perhaps prompted a more careful attitude to spending in general, but especially spending on high interest credit cards.
It has been reported that many people are cutting back on big expenses such as purchasing new furniture or clothes, items which are frequently paid for with credit cards. As people find their finances tighter they are cutting back on big expenses and trying not to overspend on their credit cards.
Cash is often the easiest and quickest way to make purchases and it benefits both customers and retailers. Using cash tends to make us more cautious as we are physically parting with money, rather than whipping out a card and entering a pin number.
Cash payments are much preferred by retailers as the charges are much lower. Many customers may not realise the expense to the shop of paying by card, which is why many smaller retailers do not accept card transactions. When processing credit card transactions, the retailer is charged 34p on average, compared with 2p for cash transactions. Debit Cards have an average charge of 8p at the bank. Credit card charges soar above those for cash and debit cards as the charge is made by the credit card company rather than by the bank.
These charges mean that many retailers have to refuse to accept card payments, or hike up their prices in order to cover the costs. However, credit and debit cards do have many benefits and advantages over cash.
If you are carrying cards and you have them stolen or lose them, you will be able to cancel them and receive a replacement. If you have cash on you, it is highly unlikely that you will see it again.
Credit cards offer high standards of consumer protection against fraud and unscrupulous sellers. If you purchase goods which are faulty, do not arrive or are not as advertised, then you can pursue the card issuer for breach of contract and usually be reimbursed under section 75 of the Consumer Credit Act. However, this only covers purchases of over £100.
Using cards gives you the option of shopping online, where many of the cheapest offers can be found. If you are only willing to pay with cash then you will be unable to take advantage of the cheap deals, especially for holidays, which are only available online.
Many cards offer rewards which you will not get if paying by cash. For these rewards to be worth it, you have to make sure that your credit cards fees do not outweigh the value of the rewards on offer. Usually if you pay your credit card off in full each month, then the rewards are well worth it.
For keeping a reliable record of your spending, paying by cards is good as each transaction is recorded and sent to you in monthly paper statements, or as online statements.
Cash and plastic both have advantages and disadvantages when it comes to spending, The important thing is to not spend above your means, whichever method you are using.
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