Credit Cards vs Cash

Credit cards are viewed by some as the scourge of society. There are ways you can save money with credit cards.

Firstly, get rid of them! I mean it. Some people have difficulty controlling their impulsive buying and just get themselves into trouble. It is definitely more difficult to stay within a set budget when putting things on credit cards. If this is you, then please just chop it up and pay cash.

Another way is the most obvious. Pay the amount owing in full each month. This is my method. I put everything on my card and pay it off. I don't have an automatic payment from my savings account set up to do this but I know that this is very easy to organise with your Bank. Why should any of us make the banks richer than they already are by paying them one cent of interest? We already have to pay card fees/account fees etc each your just to have your card, so don't pay them anymore.

That brings me onto another issue about cards. They do come with a cost (and I am not talking about the huge interest) but about those card keeping fees. Shop around and look for the lowest fees. Don't get sucked into the frequent flyer schemes that go with the cards. As far as I am concerned they are an added bonus but certainly shouldn't influence your decision. Find the cheapest running one. Try to get one that has at least 55 days interest free. That way at least the money stays in your bank account during those 55 days and if you have a daily interest mortgage you will be paying less interest on your mortgage for that time.

If you have the dreaded uncontrolled card that has a huge debt, the first thing that I would do is to chop up the card. Then sit down and work out how to curb the spending and how to pay back as quick as possible that debt. Remember, you are paying a HUGE amount of interest. You may need to speak to a finance professional about re-financing options. For those whose debt is large but not gigantic you are probably better off biting the bullet, having a few lean months and putting all you can into the card debt. Then work out how you can live within your limits with/without cards. Some people just can't cope with cards and are better off without them.

Re-financing as I have said is always an option. Beware! Some unscrupulous people will encourage you to pay off your credit card debt by extending your home loan mortgage. You are now effectively paying off $X over the life of your mortgage (and that could be 25 years)!! You would probably be better off with a personal loan which has a slightly higher rate of interest than a home loan but runs for probably only 2-3 years. Anyway, food for thought. It really depends on how huge that debt has got.

Paying by cash also has some benefits. People will often give you discount if you pay by cash. I was watching a program the other night where a man always asks for discount (even at outlet shops) and says he gets it about 70% of the time. I'm a bit shy to do that but wish I wasn't. I guess they can only say 'No'.

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