Cash has existed since Ancient Days. The elites of Lydia and Ionia used to stamp silver and gold coins to pay armies in 600 – 650 BC. That was 2,700 years ago! Yes, currencies exist way after that, and governments have changed the rules of the game, like when Nixon took us out of the Gold Standard in Aug. 15th, 1971. 

Even if you believe this change of standard was significant, it didn’t change much in your day to day life. People that own the cash are still Kings and Queens of this society. They play with different rules than people who are earning the cash from them. 

It was until the 1950’s when credit cards appeared that rules of the game changed a lot. People have been working jobs throughout their lives since ancient times, and traded time for money. There have been employers and employees all through time and people spent their money they had on hand. There was very little extra money you could spend without having it on hand first, unless you owed the merchandise and paid back at a later date. 

When the Diner’s Club Card and the first AMEX card appeared in the 1950’s , they changed the rules of the game. 

These cards gave you a glimpse of what it was like to have an open line of credit. People started to realize that they could pay for whatever they wanted at once, and then forget about it and keep their cash instead. When the bill came, they either paid it in full or left it to compound month after month. With irresponsible credit card holders, banks started making a fortune out of millions of people in debt in the United States. 

Now, coming back to present times, where we are fighting a virus that is slowing our economy and people are losing their incomes and defaulting on their payments, we need to stop and think about the credit card situation one more time. 

Many financial gurus tell us that we should pay in cash 100% of the time . I believe this is BS, because you lose a lot of benefits from being able to effectively manage a credit card for your personal use. Let me explain you the PROS and CONS of using Cash and Credit Cards, and how you can make money and be BETTER Financially by combining both.

CASH:

Cash has its perks and benefits. (like Mr. Doug Demuro would say – check out his YT if you love cars like I do) It gives you the flexibility and control you need in certain situations. Let me elaborate:

1. Certain Places ONLY Accept Cash:

Myself Included; I never like to carry cash around. Every time I carry cash with me, I end up spending it way faster than a credit card. Why? It is me. Mr. Dave Ramsey says that people spend over 18% more when using a Credit Card than Cash because Cash activates their brains and they feel they are spending. It is a trade of cash for something (product or service) while you do not trade anything when paying with plastic. 

If you ever want to pay a parking, valet, tip or anything on the streets with credit card, good luck. Chances are you need Cash for that. I always carry around $50 in my wallet just for certain situations. Also, in case of an emergency, you need cash to solve situations. A credit card will not make it. 

2. You CANNOT Spend MORE than WHAT YOU HAVE:

This is the biggest benefit of It all. Let me ask you something. Are you a little kid that cannot contain itself of eating all the candy if the candy is there? Come on! Have a little self-discipline. 

If your budget says you can spend $500 a month in Variable Expenses, and you already put aside the money you need to eat, the rest is pretty much spent on things for fun. You carry around the money in your pocket or purse, and when the money is gone it’s GONE! You cannot spend a single dime more than the $500 you had. This is the best way to control your money if you do not have any self-control. 

3. CASH produce COINS

This is the biggest nightmare of Cash. In America, prices of things are not rounded up, meaning you will never pay $20 or $50 for anything. You will end up paying $21.54, $55.21, etc. Sales Tax makes all numbers go wild and when you pay in Cash, you get an INFINITE amount of coins. 

If you are controlled, you save all the coins in a jar, and then go to the bank and change them for cash. IF you are like me, you throw them away or give them away. You end up spending a lot more money because you round up all the prices UP. Coins are heavy, dirty, and useless. The worst coins are the PENNIES. Why do we have Pennies? 

4. CASH makes me want to SPEND MORE

Different from what Mr. Ramsey states, every time I open my wallet and I have a lot of cash, I feel an urge to spend money. I love to see my wallet full of bills, different denominations, and all piled up. I like to put them in order of smallest to biggest, and all facing the same side. (control freak lol)

Cash makes my wallet thick, so it’s super uncomfortable to carry. (good problem to have) When I only carry one single bill for emergencies and my credit cards, then my wallet is thin and portable. This is just me; I am giving you an opinion here. Cash talks to me when I see it, and tells me to SPEND IT. 

NOW LET’S TALK ABOUT CREDIT CARDS: This is Where it GETS INTERESTING!

CREDIT CARDS:

1. You can Own as Many as You Want:

If you know how to manage your Credit Score wisely, you will open as many cards as you can in a certain period of time. I will upload another Blog to talk about how to get an EXCELLENT CREDIT SCORE , because I love that topic and consider myself good at it!

Think about it this way. Having credit cards is having control, having power of decision. I carry around 4 credit cards in my wallet at all time. These are personal cards, different from my Business Cards. The credit limit on these cards is $144,000 altogether. 

If I need to (which I absolutely doubt it) I have the power to grab $144,000 and make a decision. I am carrying around that amount of cash in my wallet, without the weight, without the risk, without any lack of control. You see how beautiful this is? You CANNOT DO THIS WITH CASH .

2. Credit Cards are SAFE:

IF you lose cash, you are done. No one will respond to cash, once it’s gone it’s gone! There is one thing I love about credit cards called a LOCK. You can lock all your cards in the apps and only unlock them when you want to use them. IF you have a recurrent payment, let’s say your Phone Bill, it will go through even though your card is locked. Your card is 100% protected against robbery or theft. 

Credit Cards are 100% safe to use. The only danger is the USER ! YOU! If you do not control your spending, and every time you have a credit card on hand you start spending like crazy… you have a problem. Here some solutions:

A. Limit the Credit Card to your Budget:

If you have a card with a $10,000 credit limit, you CAN spend literally those 10 grand. If your budget says that you can only spend $1,000 a month to stay within, then you must limit the card to $1,000. 

You are personally setting a limit to the card yourself. Once you reach the $1,000, it will no longer work, and you will need to get the money from somewhere else. This works like a charm to start training on self-control.

B. Do not Carry All the Cards with You:

If you have multiple cards, only carry one. And that one that you carry limit it to the money you can spend on a Budget. If you carry 4 cards like me, and CAN spend $144,000 with no limit, you will KILL YOURSELF if you don’t have self-control. Do you know I can be 7 days without touching my credit cards without any issue?? That is my self-control. I trained myself to be this way. I can also be 7 days without eating sugar, salt, refined foods, saturated fat, etc. It is the same training for everything you do in life. 

C. Check your Bank App EVERYDAY:

I have a good routine where I open my bank apps every day. I use Chase, AMEX and Citi. I have a lot of fun looking at the numbers. How do you know how much you have spent on a card? The balance is not accurate because it takes time to refresh. You need to take a look at the Credit Limit. That number is your friend. 

If your budget says you can only spend $700 a month in your credit card every month, and your credit limit is $10,000. Well, your credit limit cannot go under $9,300 at any point during the statement balance dates. When you use your card, that credit limit is automatically UPDATED, not the BALANCE. Remember that. 

By checking my apps every day, I have limited my liability 100%. I noticed someone tried to steal money out of my DEBIT card. $450 to be exact in PayPal. I called the bank and got them back. I also noticed they cloned my credit cards many times. That is why now I lock all of them and unlock them only when I use them. You cannot control your weight unless you weigh yourself on the scale every week at least, and you cannot control your money unless you see your bank apps once a day. It takes 5 mins. 

3. Credit Cards Give You Benefits:

Cash does not give you anything but dirty hands. Now with the virus going on, it is even worse to be touching cash that has been touched by millions of people. At least you control who touches your credit cards a lot more. 

A credit card is a way for a bank to lend you money and make money in the process. They give away benefits to attract the person to get the card, since there is so much competition. Every bank in America offers credit cards, so they need to stand out. If you do your due diligence, get the specific card you need for your personal use, you will get all the benefits and ZERO FEES. 

Cards with NO ANNUAL FEES are the best, but they give you the least amount of benefits. I have 4 cards, and I only pay $29/month for all 4. That is because one of them charges $29/month to utilize, but it gives me an enormous amount of points for IHG hotels worldwide. 

Do not KEEP UP WITH THE JONESES with credit cards. If you do not travel, do not get an expensive travel card. If you only spend $500 a month on a credit card, do not get the fancy card that will give you 60,000 points if you spent $5,000 in three months. You will not make it. DO NOT OVERSPEND ONLY TO GET THE BENEFITS. It is not worth it. 

Get a card with NO ANNUAL FEE and enough credit limit to be under 9% utilization every month. That will help you and your credit score. I will talk about credit scores in a different blog. 

I have bought so many things in Amazon for free with my credit cards, you can’t imagine. That doesn’t mean I spend MORE than what I am Budgeting for just for the points! It means that the same amount of CASH I would have spent in a year I put it in a good credit card, and I get hundreds of dollars in benefits FOR FREE! The annual fee should be less than your yearly benefits, otherwise get a free card. 

4. You need to BUILD your CREDIT SCORE:

If you are planning to buy a house or get a car in monthly installments or get any kind of loan to start a business, you need to have a solid credit score. 

People that pay everything in cash learn this the hard way. They are very happy handling money in Cash, and not owing anything to anyone, but forget this one simple fact about this country. People care about your credit score, and they care A LOT. If you don’t start building your score in your 20’s, or repairing it for that matter, you will be in a hard spot when you need a loan. 

Congratulations if you can buy your House in cash, your car in cash, your kid’s school in cash, your business in cash. You are a cash machine! For the other 99% of people in this country (340 million) we need loans. Getting money at a low interest rate and paying it back in full does not hurt anyone. I prefer you pay for your Car in cash and for you house with a loan. If your house is $300,000, I would rather you put that money to work in an investment at a 7% rate, rather than freezing it in a house that spends money paying cash! 

Closing Thoughts:

If you are super conservative, old school, Mr. Ramsey style, I suggest you stick with Cash. But, even paying everything in cash, you need to get a credit card and start building your credit score. Get a No Annual Fee card, put your Internet and Phone Bill in it every month, and pay it in full. If you do this for several years, your score will grow. 

You can keep paying everything in Cash while your score grows with that one Credit Card. If you are even smarter, you can get multiple cards and use them randomly. Pay one thing with one, and another with the second one. That will grow your score even more. You don’t need to carry them around and have the temptation of spending money, just leave them home. 

For people out there like myself who control credit cards, I encourage you to go and get as much credit limit as you can. Then, lock your cards and limit the amount you can spend on them every month. Get credit cards that relate to your spending, so you get full benefits, and DO NOT BLUFF!

Getting the AMEX PLATINUM and paying $550 a year just to impress your friends will only make you POORER. Get a Free AMEX with Cash Back and enjoy the benefits! Pay CASH when you want to pay cash. Use CASH and CREDIT to your advantage. You have the power to control both, THEY DON’T CONTROL YOU!

I will upload another blog post later on talking about Credit Scores and how to improve them. Stay tuned, download my free spreadsheet to budget, and keep safe!