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Credit cards can be better than cash

Credit cards can be better than cash.

Yes, you read that correctly.  Credit cards are not evil.

They can be a great tool.

They are a fact of life and here to stay because they’ve been around for far too long and they have so much value.

Sound controversial?  Let me explain.

Far too long…

As far back as the 1800s, consumers and merchants exchanged goods using credit, using credit coins and charge plates.  This was long before any European debt crisis, sovereign bailouts and Great Recessions.

American Express was formed in 1850.  Back then, it specialized in deliveries as a competitor to the U.S. Postal Service.  In the early 1900s, department stores started to issue their own cards.  By the late-1950s, this model was widespread. AMEX got on board in 1958 after the launch of the rival Diners Club card and J.C. Penney started issuing their credit card in 1959.  The credit card snowball grew from there and thankfully for us, credit cards are here to stay.

So much value…

Credit cards make life convenient.  Like cash, they are a tool but with far more benefits.

Here are some advantages of credit cards:

  • Many offer protection against theft or fraud.  Cash can’t do that.
  • For travelling, most companies will not take a reservation without one.  Cash can’t do that.
  • They can offer a good way of keeping a detailed record of your spending.  Cash can’t do that, you need to.
  • They help you build up a history for future transactions.  Cash can’t do that.

Consumers have tons of choice these days, cash-back cards, points and rewards cards, and prepaid credit cards to name a few.

I’ve owned all three of these since my late-teens.  I can’t imagine my life without a credit card.  I’ve used them to reserve a hotel room half-way around the world.  I’ve secured concert tickets.  I’ve bought my fridge and stove with it.  I put gas in my car with it and I put food on my table every week with it.

Convenience can come at a cost.  For some consumers, credit cards make it too easy to buy expensive and unnecessary things, but that’s another post regarding needs versus wants.  Credit card terms and agreements need to be understood by consumers.  Annual fees, transaction fees, annual percentage rates and financing charges are a few.  But, here’s the thing – terms and conditions should come with spending your cash too.   

Credit cards like cash are a great tool if understood and applied wisely.  Regardless if it’s cash or card in hand, the same sensible consumer habits must prevail.

What’s your take on credit cards?   An evil tool born from the financial industry?  A convenient gift for the savvy spender?

Filed in: Credit Cards, Debt, Spending

27 Responses to "Credit cards can be better than cash"

  1. MrMoxy says:

    Credit cards are wonderful if you: 1. Have a cash back no-charge card, 2. charge EVERYTHING and I mean everything, and 3. Always pay the balance off every month. The result is all the benefits you mention AND 1-3% free money. Can’t beat that!!!

    • @MrMoxy Thanks for stopping by! Yeah, as long as the balance is paid off – for sure – credit cards rock. Cash back is nice as well. Do you have a favourite CC?

  2. MOA, nice post. Also nice to see somebody spinning credit cards in a positive light :) As long as you can pay off the balance, that is really the key isn’t it? So many people can’t. I love the TD Emerald Visa because the rate is soooo lowwww.For most people I think the low rate cards are the way to go.

    I’ve had my choice rewards credit card for years, its not the best but since I have it why not take advantage of the points? Just save some money on my FinCon12 airfare this morning :) I’m looking for a new card though, and I know you like the MBNA card :)

    Cheers!

    Dividend Ninja

    • @The Dividend Ninja Thanks Ninja. We’re cut from the same cloth I think, so you would likely feel the same!

      I wish I was able to go to FINCON. Maybe next year?

      The MBNA card does rock. I can’t wait to get my cash back. :)

  3. Just got my $194 annual cash back refund (2-3%) just for using my card. Not a bad deal at all I would say. As of right now I have yet to pay interest, and Visa has paid me about $500. I’ll take it!

  4. Stueegee says:

    I agree wholeheartedly. They are great. Since last May I have earned $301 on my Walmart CC. I also noticed i get a better rate on US transactions with this card versus my bank card. Just like McDonalds —–I M LUVIN IT

  5. I find it interesting that our economic environment makes it easier and more beneficial for consumers to essentially temporarily borrow money rates upward of 20% interest for everyday expenses. Yes, there are benefits to using credit cards, as listed above. I’m not disputing that. I reap those benefits as well. I just find it interesting. Why is it the average person has to resort to paying with credit cards for everyday expenses? And in many cases it’s not a matter of should I pay with cash or credit. It’s a matter of which credit card will provide me with the most value in rewards/benefits. I don’t think it will come as any surprise to the readers of this blog to suggest that our economies are supported by borrowed money. And I tend to wonder who benefits more from all this borrowed money. The consumers who are rewarded for accumulating debt (if only temporarily), or the lenders. i don’t think it’s the consumers.

    • @TheDailyThinker Thanks for the comment. Why is it the average person has to resort to paying with credit cards for everyday expenses?

      They don’t, they have choices – cash, debit, etc. The thing is, and businesses like banks know this, people spend more with CCs. Some people that is.

      No surprise, you’re right re: borrowed money runs the economy. Actually always has. The ones who win are savvy spenders. They are the minority. The rest, well, you know who wins.

      Thanks for your detailed comment, always appreciated ;)

  6. SPBrunner says:

    I am glad to see someone say something positive on credit cards. I must admit that I put everything I can on my card. It is a lot easier to track where you spend your money.

    It is like all financial vehicles, it must be used appropriately. Some writers seem to suggest that no one can handle them appropriately, and I find that rather insulting. All you really need to do to handle credit cards is to use some common sense and think about what you are doing. I do not find that tough. I realize some people do and do not want credit cards. That is fine, just let me have mine.

    I, by the way, have PC master card and get free groceries. I used to collect some Air Miles, but since they no longer will give out Starbucks cards, I am not as happy with them.

    • @SPBrunner Well thanks Susan! I knew I could count on you!

      Seriously though, that was my point, and yours “It is like all financial vehicles, it must be used appropriately.”

      I too, have a PC MasterCard but have since switched to the MBNA SmartCash card. Lovin’ it. My wife and I expect $50 each in cash back in another week. Can’t wait. More $$ for dividend-paying stocks :)

      Here is the link if you are interested:

      https://www.mbna.ca/RWDapp/home?mc=SMCACN&locale=en_CA

  7. Elemag says:

    Last year my wife and I got $403 cash back on our Scotiabank Visa. This money was a 2% return on spending on needs like groceries, gas, utility bills, etc. Had we used cash or debit cards, we would have gotten nothing. Now that we have switched to the MBNA Mastercard I expect we’ll earn even more cash back this year. So I definitely agree with you that if used wisely, credit cards are great tools and very convenient.

    • @Elemag,

      $403 cash back? Wow. Nice. If you have the MBNA Mastercard (like we do), I think gas and grocery transactions will really help the cash back. This will be our first full year with the MBNA SmartCash card, so it will be interesting to see how much we can earn back. ;)

      Thanks for your comment!

  8. Vicky says:

    Personally, I love credit cards. My favourite card is the MBNA smart cash Mastercard! I also believe that they can be evil in the wrong hands, and am personally helping people struggling with consumer debt. Credit cards should only be used if you have the cash to pay off the balance every month. Otherwise, the rewards or cash back isn’t worth the financial hole that you will continue to dig into every month.

    • @Vicky,

      Thanks for stopping by and your comment.

      That is my/our card as well. My wife and I got ours about 3 months ago. We’re expecting our cash back cheques within a week or so. That will be nice, seeing some cash instead of a bill. If you pay off your balance every month, credit cards are a great deal going in my opinion.

  9. I am trying to use CC almost all the time (for the points and convenience). If I could I’d pay the rent as well using the CC. I am paying cash only for the cab fares if they don’t have CC readers and I mean here the wireless ones not those where they take an imprint (yes, I know I am paranoid).

    • Yeah, that’s our plan as well. Go for the points or in our case, the cash back. We’re expecting some cheques (cash back) in a few weeks. Can’t wait!

      You’re not paranoid, you’re cautious. I’m the same way – you have company :)

  10. Geerbabe says:

    I am frustrated by a system where credit card companies charge vendors a fee for every transaction they process, but then make them sign a contract saying they will not offer a discount to people who pay cash. The vendors have to raise their prices to cover the cost of credit card transactions and we all end up paying more, regardless of how we pay for our goods. The credit card companies then offer consumer incentives like cash back, so we feel like we are missing out if we don’t pay with a credit card. Really, it’s like they are taking a whole pie and offering us a little slice back. We would all be better off if the government allowed companies to give cash discounts. We could then all keep the money in our pockets to start with!

    • @Geerbabe,

      Fair comment!

      I agree, since many credit card companies offer consumer incentives like cash back, we (consumers) are best to take advantage of them – that is – as long as we can pay the balance back every month.

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