Which form of payment you should use for a purchase depends at least as much on your level of discipline as on your level of income—and don’t forget about security.
Use cash for small purchases, when you’re in a hurry, and if you won’t mind not having a record of the purchase in a bank or credit card statement. You have to feel comfortable carrying cash, too. Many people won’t for safety reasons—flashing a wad of bills in a store could make you a target in the parking lot. On the other hand, many people concerned about identity theft or those recovering from a bankruptcy choose to use cash exclusively.
Use a check if you need a record of the purchase for tax or business purposes, if you don’t want to carry around a bunch of cash, or if you don’t have a credit card because you don’t qualify for one. Of course, you’ll need to write a check to pay bills by mail, and they can come in handy if your grocery store will let you write a check for more than your purchase in order to get cash without going to the bank or ATM.
Use plastic only if you know yourself well enough to not let the balance build up. It’s convenient and fast to use a credit card, especially if you shop by phone, but you need to keep track of what you’re charging so it doesn’t get out of hand. It’s best to pay the full balance every month, for two important reasons: first, in order to build a good credit history (which is invaluable for the remainder of your natural life), and, second, so you’re not financing a lifestyle that you can’t really afford. If you’re concerned about security when shopping online, check to see if your credit card issuer offers virtual credit card numbers—these are card numbers generated at the time you’re ready to make an online purchase and are good only for that transaction. If anyone gets hold of that number, it won’t be valid for any other purchases.
So, take stock of your habits, your level of discipline, and how you feel about identity theft and online security, and you’ll be able to make the best choice for you.
Kathryn Marion is the President of Education for
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[tags]personal finance, credit, spending, budgeting, identity theft, paying, discipline, cash, checks[/tags]
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