There’s been a lot of love for credit cards floating around the internet lately, in spite of the recent consumer backlash against the card issuer industry. We, of course, are guilty of this too.
Credit cards have a lot going for them, after all. As Fred Wilson points out at the AVC blog, credit cards are more convenient than cash since you no longer have to sign for most purchases. And even taxis in NYC take credit cards now, eliminating what was once a New Yorker’s primary cash expense. J. Money at Budgets Are Sexy mentions that they are convenient tools for budget-tracking (when enjoyed responsibly), that never involve overdraft fees. And the guys at CardRatings point out that credit cards can pay you, if you know how to maximize your rewards (a topic near and dear to our hearts). Plus I would point out that credit cards are one of the best and simplest ways to build a credit history when you’re first starting out in the “Real World”.
That said, there are still a few reasons why it still makes sense to keep a bit of cold, hard cash on hand:
- Cash is accepted everywhere. When traveling abroad, or even through the U.S. heartland, you’ll be fine with your Visa in most large cities. But once you step off the beaten path (where all the fun stuff happens anyway) you’ll need cash to get by. Credit card companies charge merchants up to 3% on transactions, a tax that your favorite street vendor or highway diner can’t always afford to pay.
- You can negotiate with cash. Just like the side street shops overseas, your local deli or liquor store is probably a mom-and-pop operation with slim margins. So if you offer to pay cash rather than hand over plastic, you may be able to squeeze 5% out of them. And for bigger ticket items like appliances, you can sometimes force a deal by forking over cash on the spot.
- Cash is what bankrolls are made of. Have you ever fantasized about making snow angels in a pile of credit cards? Have you ever seen a rap video where they pop champagne and throw credit cards all over the place? ‘Nuff said.
- Cash runs out. Borrowing from J.’s drinking analogy, the local pub is a great place to demonstrate how cash can save you. When paying for your drinks with cash, you have a natural incentive to stop at some point and go home. But if you open a tab and the party gets good, sticker shock can come back to bite you when it comes time to close out.
So cash isn’t dead (yet). While I still use credit cards for 90% of my spending, there’s always a reason to keep a few bucks around.
What about you guys? Anyone who is all-cash or all-plastic have any comments on why yours is the best policy?