Credit or Debit?

Once, someone inquired about the benefits of using cash or credit cards, considering my assertion that I maintain a surplus over my expenditures. There are indeed advantages to both options, but some considerations need to be taken into account.

Firstly, it’s essential to recognize the fundamental differences between credit and debit cards. While both offer fraud protection, fraudulent activity on a debit card immediately withdraws money from your account, potentially leading to significant problems. On the other hand, with a credit card, disputing a charge results in an immediate credit to your account.

Personally, I settle all my credit card balances monthly, ensuring that I avoid any interest charges. This approach allows me to enjoy various rewards, such as cash back, discounts, and airline miles, essentially offering a no-cost bonus. Moreover, I utilize Quicken to download and easily monitor all my transactions.

Nevertheless, credit cards can lead to overspending due to the ease of swiping the plastic, which somehow feels less like spending real money. Consequently, when the statement arrives, many individuals opt to pay only the minimum amount, succumbing to the less painful option. Credit card companies capitalize on this aspect of human psychology, earning substantial profits each month. They also make significant income from late fees when people overlook due dates. To avoid this, I ensure that all my cards are set up for automatic minimum payments before the due date, as paying unnecessary late fees is an avoidable and wasteful expense.

I hope this explanation proves helpful!