Should I use cash or credit?
This is a question that many consumers ask because of the current economic uncertainty in our country.
actually, revolving credit, largely made up of debt credit card has dropped nearly 20% last year according to the Federal Reserve.
the use of credit cards is certainly slows down due to less borrowing by consumers and the tighter lending standards banks.
is there a good time to use credit cards in specific cases, and when should you use debit?
lifestyle paper - debit and / or cash
If you have $ 5,000 or more in consumer debt, then you are a candidate for the "cash only" or map lifestyle speed, because you have to pay that debt.
Using your debit card allows you to mix the discipline of paying cash with the convenience of using plastic.
most retailers, including online retailers accept debit cards if they accept credit cards.
In addition, there are other options such as PayPal that help consumers who wish to use a debit card instead of a credit card.
Since debit cards are widely accepted, the decline in the use of credit cards is probably due in part to people who want to get a better handle on credit card spending.
according to a recent survey by Auriema Consulting Group, 28% of consumers have changed the way they pay for purchases from the great recession with an increase in the use of debit cards coming at the expense of cards credit.
in fact, 46% of consumers surveyed said they believed debit cards helped control their spending.
There are exceptions, however, when you'll want to use a credit card instead of debit and we'll talk further.
In the meantime, there is a huge population of consumers who just want to get rid of credit card debt.
Plastic Surgery
What if you are one of those consumers to read this and you just want to pay your credit card balances?
Then you might be a candidate for plastic surgery you may need to cut some store cards and focus on paying off your debt.
If you remove all cards make sure you do not cancel those cards the bank such as Visa, MasterCard, AMEX, Discover set.
Second, do not cancel the cards you have held for a long period of time.
Instead, cancel department store cards (marked "closed at consumer demand") and other cards you have held for 2 years or less. Otherwise, you might inadvertently hurt your FICO (or credit) score
Then take the following three steps to get a grip on the plastic
First step: Face .. the facts
the first step to become less plastic is to assess the situation. Get a free copy of credit report at AnnualCreditReport.com both spouses and use, as well as your files, to the list of the following:
- creditors
- balance for each account
- minimum payment
- Number of payments left
- interest rates
- deadlines
step Two: Make the commitment free debt
the next step is to commit to all the extra monies to the debt, including:
- Heritage
- tax refund on income
- Bonus or hazardous duty pay
- repayment insurance dividends
- Pay increase
- presents cash
- Any other unexpected additional income
step Three: connect with debt Resources payment
nFCC.org or families of military advisors - for free consumer credit counseling, go to nfcc.org and locate a consultant near you.
If you are a military family, then you can go to your Fleet Center and readiness of the family, Family Support Center, or MFLC counselor's crunch the numbers with software designed to help you to repay . debt in less time
pay more than the minimum - paying even $ 5 to $ 10 more than the minimum, it is easier to pay on the principle thus saving interest and debt payment earlier
payment Using the snowball effect - It is preferable to arrange the debt in one of two ways :. 1) pay the highest interest rate or 2) the shorter pay-off time.
If all balances are close, then pay the one with the highest interest rates.
However, if they have a much lower note to a lower interest rate, it tends to serve as a morale booster to get it paid off.
For example, if a map where with a $ 1500 balance at 20% compared to a $ 0 card to 15% and then pay off the first debt as a small coup psychological inch.
Then apply the previous payment to the bill next on the list, there will be a snowball effect that gains momentum and debts are paid down.
The exception: When to Use Credit
Rentals - When renting a vehicle, it is difficult (if not impossible) to do with a debit card
again, they will be. a hold on your card that can affect your current account and cause problems such as bad checks
Hotels -. Many properties will not allow you to use a debit for the same reason that the rental car situation. They put a hold on your card that can be several hundred dollars.
In addition, the wedge can remain on your card for a week or more. That is why it is best to use a credit card in this situation
Consumer protection -. Debit cards offer fewer consumer protection as credit cards. If fraudulent charges appear on a credit card bill, in certain circumstances, the owner may refuse to pay.
In many circumstances, federal law limits the liability of the holder of the credit card $ 50 for fraudulent charges, and most card issuers have zero liability policies for identity theft victims .
secondly, stolen money from a debit card is immediately withdrawn from the bank account of the cardholder, which means they have to fight to get reimbursed funds.
extended warranties and Perks cards - Some premium credit cards will automatically extend the warranty on an item purchased with this card while other cards offer a price guarantee (if you find the item cheaper elsewhere, they will refund the difference).
Then there are the cards that still offer points that can be redeemed against products or airline miles.
These are cases where you might want to use a credit card.
are you a paper or a plastic person
photo credit: mangpages via photopin cc
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