Shopping with your Credit Card is Hurting Your Finances

Written by: Cash101 Staff

Shopping with the comfort of your home is a great blessing for different people in their ways. You may be busy with your white collar nine to five jobs and may not want to visit places to shop. You may be a very busy mother and shopping with kids may seem like an unwanted adventure to you. Who wants to go from shop to shop in search of an item of your choice these days? Credit cards seem to be saving your time and energy. Considering both the long and short term advantages of using credit cards or cash is a real matter. Shopping is what you spend all your income on. The way you shop must predict your financial wellbeing then. If financial wellbeing is your concern then continue reading. We will discuss with you important points to help you see how these mediums of shopping affect your finances.

Credit cards come into play to avoid all the hustle that is innate to going out in person. You can avoid traffic, long queues, dealing with many people and much more. Credit cards might get you some discounts online. In all the whole process seems to be comfortable.

Credit cards also seem to be comfortable while shopping in person. You only need to swipe the card and get going. But before swiping the card you must know the cost involved with using credit cards. Your credit cards do provide you with some reward points which you can use. These reward points are not all for free. You can claim the reward points you earned with your credit cards only if you clear all your credit card balances every month. Otherwise, you would only be paying interest charges on your borrowed balance which is more than the reward points you earned. We all know that there is no free lunch. The same is the case with using credit cards. Why would credit card companies just lend you money? This is how credit card companies make money on your negative balance each month.

There may be instances when a calculated decision is to pay through cash. You may just do not want to carry your grocery and gas station bill to be charged with interest. The thing with credit cards is that you keep on paying. Here you do not realize the balance waiting for you as the sum of all your transactions. In case you are unable to pay your monthly balance get ready to pay for an additional amount as well.

Credit card balance is very important in your credit score determination. You will not want to lose any of the points just because you are not able to pay for the credit cards regular installments. Credit cards give you fake financial freedom. You overbuy, cross your budget limits or even buy things you just do not need. Eventually, you are liable to pay for it. Late payments hurt you in an even worse way. You, for the sake of your financial security, need a good credit score. Whether you need a loan to purchase a house or investment for your small business or start up all depends or your credit score.

A bad credit score makes it difficult for you to get a loan or investments. Even if you successfully get investment or loan with a low credit score, the terms and conditions are not going to be easy. So a desire for avoiding queues or buying a little home decor item which you cannot just pay right away may hurt you in the long term. There are places where cash is not accepted so you need to pay through your credit card but still, you should not be taken away by the credit limit you have. Go ahead with the purchases that you can easily pay off with your regular cash flow.

Cash is the fundamental and smartest way to go. You can manage to take out some cash and plan your purchases. This will help you to stick to your budget as well. This small change will help you avoid unnecessary expenses. It will help you to payoff tour debt. Getting cash every week may not be feasible even if it is desirable but still, you must manage to get cash twice a month.

Another smart way to design your budget is the envelop system by David Ramsey. This helps you to designate your cash under different heads. This way you can keep on track and trace you’re your expenses heads. These expenses heads may include gas, groceries, households, clothing, miscellaneous, etc. The rule is to not to cross the envelop limit for that certain expense.

The most practical way is to use both a combination of cash and credit card. It is practical and keeps you on track with your financial needs. You can use cash for all your major transactions and pay with the credit card for all the payments above that. This way the transaction amount of credit cards will be really small relatively. You will have no issues even if you are not able to pay off credit card balance right away. Few dollar bills per month with not affect your credit score. Sticking to this minor practice will bring in your life a noticeable change. Your financial security will be much better with this practice. You are free to choose the right balance of cash and credit card but do not prefer the ease of transaction only over your long term financial wellbeing. In case you have secure financial inflows then you do not need to stick to strict practices but otherwise watch your shopping experience.


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