Credit Card – is Magic Wand of today’s world which fulfills all your shopping needs in no time! Yes, though there are terms & conditions applied. Interest is the cost that is attached with this magic wand usage depending upon the frequency and limit utilized. But if you have enough cash then which payment mode is more profitable for you, Credit card or cash purchase? What if we told you using a credit card could save you more than a cash purchase? No, we are not joking, let us help you understand more about cash vs credit card by answering these questions and revealing the truth.
The credit card has become a necessary evil that is ruling our world right now. In fact, this card fetches huge income for all the banks. The credit card payment market is expected to grow from $671.73 Billion in 2020 to $729.9 Billion in 2021 at a compound annual growth rate (CAGR) of 8.7%.
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Let us consider two situations for Cash vs Credit Card situation:
You have enough cash to purchase the product
- The cash you have is more than the total price. Use your credit card to make the payment in full or in EMI’s depending upon any eligible discount offers.
- Once the product is purchased, set aside the cash you have in the bank account linked to your credit card, to avoid any interest charged on non-payment on the due date.
This way you will be able to enjoy the benefits of discounts, pay the dues on time, have no interest charged while increasing your credit score which is the cherry on the top!
What if You do not have enough cash to purchase the product?
- The cash you have is more than 50% of the total price. Use your card to make the payment in full or in EMI’s depending upon any eligible discount offers.
- Once the product is purchased, set aside the cash you have in the bank account linked to your credit card, to avoid any interest charged on non-payment on the due date.
- Wait for next month’s salary or income and set aside the remaining cash that was needed to purchase the product in full in the bank account linked to the credit card, to avoid any interest charged on non-payment on the due date.
This way you will be able to enjoy the benefits of discounts, manage your cash cycle, pay the dues on time, have no interest charged while increasing your credit score, and attain financial freedom!
The preference here would be using your credit card instead of cash to purchase the products. Let us understand how credit card usage wins over cash in cash vs credit card situation
Why prefer a Credit card to a Cash purchase?
- Credit card payment mode helps you enjoy the benefits of Eligible Discount offers
- You may earn Reward Points which can be redeemed in exchange for some valuable products or services
- Increase your Credit score if payment is done on time
- Enjoy certain Benefits only applicable to credit card users like free usage of Airport lounges, Spa treatments, Movie tickets etc
Cash vs Credit Card
- A credit card can be easily carried while cash is difficult to carry everywhere.
- A credit card lost may be blocked from being used, but cash if lost is lost forever.
- Cash does not give you more purchasing power, if your cash is exhausted it will put a full stop to your purchasing power. In the case of credit cards the limit is given to you, thus this does not necessarily mean that the entire limit should be available in your bank account as the limit provided is like a loan lent to you.
- Cash is limited to the money that you have currently whereas credit card reflects your purchasing power based on your previous payment history.
- Cash payments will never help you get a good CIBIL score, whereas credit card usage with good payment history ensures a good CIBIL score for future benefits.
What would be your take on cash vs credit card?
How to make most of your Credit card purchases?
Let us give you all the Smart finance tips below to enjoy uninterrupted above-mentioned benefits
- Managing your cash cycle
- Setting aside total cash equivalent to the price of the product to the bank account linked to credit card
- Avoid impulse buying if you do not have at least 50% cash equal to the total price of the product/service
- Pay the bills before the due date to avoid any interest charges
- Avoid being spendthrift
Happy purchasing through credit card!
Let us know which payment mode do you prefer (Cash vs Credit Card) in the comments?
FunFacts
- Asia is the largest region in terms of credit card payments accounting for 30% in 2020
- Visa & Mastercard have mostly accepted credit cards across the globe
