6 reasons to stop using cash and start using credit cards
Want to protect your money, score major rewards, track your budget and stave off germs? Go cashless
Writes about personal finance and blogs at "The Funny Money Blog."
For decades, futurists have been predicting the advent of the cashless society, but like flying cars and time-travel, that future never seemed to get here – until now.
Between credit and debit cards, online payment systems, peer-to-peer networking, smartphone apps and more, it’s never been easier to quit carrying those greasy greenbacks. And beyond convenience, there are a number of benefits to going commando when it comes to cash – as long as you use the right substitute.
Unlike cash, credit cards give you more consumer protections, snazzy perks that reward your spending with free airline flights, hotel rooms and even cash back – plus, they make it easy to track your purchases. Paying with plastic even protects you from germs living on those bacteria-laden bills.
Only just half of shoppers regularly carry cash, according to a new U.S. Bank survey. If you’re one of those who’s still using paper over plastic, consider these six factors:
|THE COSTS OF PAYING BY CASH
|THE COSTS OF PAYING BY CASH|
Cash is easy to lose. Whether that fat wad of $20s gets dropped in the street, runs through the wash in your jeans or burns up in a house fire, once it’s gone, it’s gone for good. The U.S. Treasury handles more than $30 million worth of damaged and mutilated currency each year.
“Carrying around a lot of cash just isn’t safe,” says Beverly Harzog, credit card expert and author of “The Debt Escape Plan.”
Credit cards are not only more resilient, they also offer more protection than cash substitutes such as debit and prepaid cards and checks, because the money isn’t taken immediately from your account.
“If somebody hacks into that (debit card or checking) account, you can lose everything in that account,” Harzog warns. “Many banks will cover that, but you can be without that money for a week or two. If you live paycheck-to-paycheck, you can get hit with late fees and other problems.”
2. Consumer protection
Once a merchant or online retailer has your cash, your only recourse if you’re dissatisfied is convincing the seller you deserve a refund or exchange, or resorting to lengthy legal complaints. But with credit cards you’ve got plenty of options, notes Robin Saks Frankel, credit card analyst at Bankrate.com.
Under federal law and the dispute policies of card issuers, credit card companies can reverse a charge if a merchant fails to deliver your order, sends unordered items, delivers damaged merchandise or hits you with unauthorized charges.
Many card issuers go even further, offering purchase protections that include extended warranties and replacement insurance for lost, stolen or damaged purchases. There’s also price protection, which refunds the difference if something you buy goes on sale in 60 to 90 days, and refund protection if you’re unhappy with a purchase.
The most recent survey of purchase protections by CreditCards.com found more than a dozen cards offering a package of all those benefits, including the Citi Prestige card and other Citi offerings, the Chase Freedom card and Wyndham Rewards Signature Visa.
Other protection perks include getting free credit scores from a number of card issuers, including Citi, BarclayCard, Capital One and Discover. Also, Discover just introduced free ID theft protection that monitors your Social Security number and alerts you if anyone tries to open credit accounts in your name.
3. Perks and bonuses
Beyond security, where credit cards really beat cash is with benefits and rewards, from free hotel stays and airline trips to cash back rebates, notes credit expert John Ulzheimer, formerly of FICO and Equifax.
“Rewards are certainly a benefit of using plastic over cash, and there are so many different programs that have no fees. Except in the very rare instances where a retailer will give you a slightly lower price if you use cash, it offers no rewards,” he says.
Video: Exclusive credit card rewards experiences
How good are these rewards? Consumer Reports found that a typical family using just two cards – an American Blue Cash Preferred Card and Citi Double Cash Card – could reclaim more than $3,000 in cash over three years.
Combining these kinds of offers allowed Laura and Brad Barrett, two Virginia CPAs who run the RichmondSavers.com blog, to wrangle a $4,000 family trip to Disney World using credit card rewards.
Other perks may include exclusive offers on entertainment offerings and experiences, hotel room upgrades, concierge services and access to airport lounges, just to name a few. Flyers using the Gold Delta SlyMiles card from American Express get one free checked bag on each flight, the Chase Sapphire Reserve card offers trip cancellation and delay insurance, travel accident insurance and lost luggage protection, and the TSA lists 16 cards that can score you free access to the airport Precheck program that speeds you through security lines.
As Frankel of Bankrate.com notes, “As more and more credit cards compete for your dollar, the perks just keep getting better.”
4. Budgeting and expense tracking
Unless you like toting a wallet full of receipts, cash also is difficult to track. With credit cards, however, it’s easy to track exactly where and when each purchase was made. Many cards will give you an end-of-the-year statement where you can review purchases, which comes in handy at tax time.
You can link credit cards to popular online tools such as Mint and You Need A Budget to track and categorize your spending and build a budget, without the hassle of manually tracking every penny.
At the SimpleDollar.com blog, Holly Johnson outlines how she uses credit cards to keep her family’s spending on track. “Using credit cards linked to online tools,” Johnson writes, “is one of the fastest ways to get you the most relevant data on your spending and savings.”
With mobile apps gaining traction as an accepted form of payment, cash is taking up residence in fewer and fewer wallets, a recent U.S. Bank survey found.
5. Rein in overspending
The key to making credit card perks work for you is to avoid carrying a balance. Otherwise, you can end up paying more in interest and get so far into debt that any rewards won’t be worth it.
“If you can control yourself and stick to a budget, you can definitely profit from using rewards cards,” Harzog says. “But you have to do whatever you have to do to pay the bill on time and in full.”
She suggests checking your accounts at least once a week to make sure you don’t forget about any spending, especially if more than one person is using the account. Other strategies include paying your card accounts two or three times a month, to avoid letting balances creep up and increasing your credit utilization ratio, the second most important credit scoring factor after making on-time payments.
Another option is use your card issuer’s mobile app to pay each purchase as you go. If you’re buying online, switch directly over to your card’s site or bill-paying account and pay off the new charge right away.
6. It’s filthy lucre
Another reason to drop cash is that it’s literally dirty money, with “lots of nooks and crannies for things to get stuck in,” warns Emily Martin, an assistant professor of epidemiology at the University of Michigan’s School of Public Health. An ongoing study at NYU’s Center for Genomics and Systems Biology found bacteria that can cause pneumonia, food poisoning and staph infections among about 3,000 organisms living on $1 bills.
Put it altogether and going cashless can be a quick way to improve your budgeting, safeguard your money and pick up some hefty bonuses – all without picking up any germs.
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