Who carries around all this cash?

When given the choice, most people would undoubtedly choose to pay cash instead of financing for a couple of reasons. First of all, paying cash will prevent them from having to pay any interest on the amount borrowed. The other advantage is that paying cash makes it easier for most people to keep track of how much they are spending. However, the reality is that carrying around enough cash to make a larger purchase can be dangerous, and people could risk having it fall out of their wallet. For this reason, it might be a wise idea to consider using some type of card, and three types are credit, debit and prepaid. Each of these have their advantages and disadvantages, and one can use these to determine which card will work best for them.

Credit Cards

This type of card is the only one that will allow people to theoretically borrow money that they do not currently have. This can be a great option for those larger purchases that are required when people do not quite have enough in their bank account. In addition, credit cards can be a good solution if people have the money, but they do not want to carry 10, $100 bills to the electronics store to buy a television. Obviously, if they pay off their bill at the end of the month, they will not be charged interest. However, the interest rates associated with credit cards can vary widely, and all of them will be fairly high. The average credit card rate for someone with good credit will be somewhere between 15 and 20%. If someone has less-than-perfect credit, their interest rates can easily exceed this amount by a fair amount. People should never use credit cards with the mindset that they will pay the balance off one of these days because it is amazing how fast the interest rates can rack up on these cards. In addition, people have to be careful in regards to ensuring their payment is made on time because a late payment can result in a penalty fee, which can be $25 or more. With that being said, some credit card companies will waive this fee as long as forgetting to make a payment is not a regular occurrence.

Debit Cards

Similar to credit cards in the fact that people do not have to carry around loads of cash or a thick checkbook, debit cards are another option to consider. The nicest thing about debit cards is that the only thing one needs to obtain this type of card is a checking account. Unlike credit cards, a debit card is tied to the person’s checking account, and they will not be able to “charge” more than what they currently have in their checking account. In addition, debit cards also do not charge interest rates since the user is using their own money and not essentially using a loan that happens to be on a convenient little card. The one downside to debit cards is that people who do not currently have the funds they need to buy what they want right now will have to wait to make their purchase, or they may get hit with a costly overdraft fee.

Prepaid Cards

The final type of card is a prepaid card. People can get prepaid credit cards virtually anywhere from online stores to their local grocer. Many consider this type of card to be the safest because if the user tries to charge more than they have on the card, the transaction will be rejected. This means they will never be penalized for overdrafting or exceeding the maximum balance on their credit card. The other nice thing about prepaid cards is that people can load as much money on the card as they want. This is a great option for people who receive a fair amount of income in cash, but they feel unsafe carrying around a bunch of cash. The one downside to prepaid cards is that they usually charge a small fee to load money on the card each time the balance is increased. However, the fee could be an advantage for those who do not keep track of their balance as well as others because this will be like them paying a penalty upfront, but it will be far less expensive than what they would pay for over drafting or in interest.

 

When it comes to making larger purchases, cards are usually a safer alternative to cash. However, with credit and debit cards, it is important for people to ensure that they are keeping track of their balance. With three types of cards available, anyone can find the one that is right for them, and this is a personal decision.