Four Reasons To Pay Cash (Not Credit)

MAR 13, 2012

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Putting purchases on plastic may be tempting, but when it comes to avoiding debt, saving up and paying cash is your best bet. So, before you reach for your credit card or apply for a loan, check out these four reasons to pay cash for purchases.
Make More Purposeful Purchases
When you reach for cash, you are likely to feel a twinge of hesitation when parting with your green. Research has shown that consumers often have an emotional attachment when paying with cash as opposed to to credit cards, which can help put your spending in perspective and help you avoid a mountain of debt. Instead, you may find yourself taking the time to hunt down the best deal before dishing out the dough.
Cut Down on Impulse Buying
It is easy to get caught up in the moment when walking by a store window or uncovering the perfect pair of shoes. But, when you promise yourself to pay cash, especially for things you want but may not need, you may not have the funds in your pocket to pay for your transaction and have to come back. During this cooling off period, you may just find that you do not want the item you sought after, keeping the cash in your pocket.
Avoid Interest Payments
When you charge to your credit card without paying off your balance in full within the grace period, the cost of your initial purchase rises thanks to interest charges. By paying cash for the things, you’ll steer clear of paying extra for your purchases and maximize the value of your item. When you pay cash for purchases, you also avoid adding to your total debt and lowering your credit score.
Obtain an Automatic Asset
Especially true with big ticket items that lose value quickly, such as a car, paying cash for certain possessions puts the equity directly into your pocket. When you avoid taking out an auto loan or charging to a credit card, during a time of need, such as unemployment, you have the ability to downgrade your car or sell your home without the risk of being upside down  on your loan or having the lender repossess your purchase.
Just because these four reasons to pay cash for purchases can save you some dough doesn’t mean you should cut up your credit card just yet. Some credit cards offer extended warranties or purchase protection, so when it comes to goods like electronics, airline tickets and other big ticket items, saving up the cash first so you can pay off the credit card charges within the grace period offers you the best of both worlds.