Paying in cash or with your card?

Technology has made many things easy for people. Paying for purchases with a credit or debit card like an Automated Teller Machine (ATM) card has made transactions more convenient. There is also the argument that you are safer with an ATM than you are carrying cash in your pocket or wallet. Also, using cards for your transactions tallies perfectly with the Central Bank of Nigeria’s campaign to rid the country of cash and make everyone embrace a cashless society.

However, from a personal finance perspective, which of the two pays you more? Are you better off making payments in cash or card?

With the advent of cards as an alternative for hard cash, most people believe cash is going out of fashion. It is more chic now to whip out an ATM and slot it in a POS at a sales point in a mall than going through the “stress” of counting cash. Some banks may even allow you to customize the look of the card to enhance the aesthetics.

Cards come with security numbers; debit cards have personal identification numbers (PIN) while credit cards are secured with your signature or a PIN for some. Cash on the other hand, is only safe so long as you are able to defend it should someone want to snatch it from you. If the cash in your hands is taking, the process of collecting it back is very difficult unless you have strong evidence to back you up. In that regard, cards are mostly safer. In recent times though, issues of cyber attacks and data breaches have called into question how safe a card really is.

Most cards, like the credit cards are universally acceptable as cash unlike the hard cash itself. For instance, while you may find it difficult to transact with naira in another country, you can use your Mastercard in many countries.

Nevertheless, cash trumps card in terms of prudent management of your resources.

One of the reasons most people go cards is the convenience to buy more than they can pay for. While this may be an advantage, it is a major drawback to savings. With cards all you need is a POS and the nearest ATM machine to buy – even things you do not need. They are readily available unlike cash. To get cash, however, you will have to make the trip to the bank. Cash withdrawal comes with a limit, which in most cases means that you are restricted to buying only the things that you need.

Meanwhile, when making a large-scale purchase like buying a refrigerator for instance, carrying large amount of cash around may not be advisable. In that case, if you do not have a check, you can use your ATM to make the transaction. Similarly, you can miss out on some great deals if you do not have the cash to pay for them. Here your card becomes very helpful.

But cash wins it, if you are paying for bus fares, taxis and local guides and so many other little purchases.

With cash payments you will not require to pay commission to credit-card companies or high interest rates to banks which prefer that you pay in cash.

Having cash can help you avoid stressful predicament, should you find yourself in a place that won’t accept your credit card or low internet connectivity.

A debit card may not give you the clearer picture of how much has gone out of your account especially if you are making small purchases. Your account balance may not come immediately to your phone or in the case where the phone is not at hand you will have to make the trip to an ATM to know what the balance is. With cash it is easy to monitor and hopefully curtail your spending before it gets out of control.

In general, if you need to rein in your spending, a cash-only diet is highly recommended.

 

FRANK ELEANYA