cash is king

"Cash is king". photo by Gina Matchinsky

January 16, 2013 question is - Do you owe someone money? Does someone owe you money?

Today's question is another of those not really apt question to ask me at this point. For one, if it can be helped, I don't want to borrow money and for another, I just moved to a new place so I am pretty new where I am for people to borrow me money from.

If it can be helped, I don't even want to buy using a credit card. It feels like spending money you still haven't earned. What my father inculcated in my mind when I was a kid was to always try to live within my means. Had I been under his wing still, I know he will not permit me to use a credit card.

That got me thinking about the purpose of credit cards. A friend said it is safer because you don't need to bring too much cash. And not much problem with giving exact change or counting back your change, too. But then you can also do that with a debit card.

Even with the perks of having a credit card like a cash back of 1-5% or investment rewards or earning money through point system or frequent flyer miles, they only give substantial benefit if one spends or travel more.

I think credit cards are good for businesses so you can start one or sustain one if you don't have the immediate cash you need. You get to have a spending money at the time you need it for something that will eventually produce a bigger profit for you to pay what you owe.

It is also good for building up credit rating and a little more safer than debit in cases of fraud. The grace period for the money borrowed allows money to grow a little bit more if you have high yield checking account, too. It is also more universally accepted in hotel and car rentals, too, than debit cards. So they work better for people who are good in juggling money, have more money and are in business to make more money.

But to an average Joe or Juan who are not good in math and projecting future earnings, they are more likely to spend so much more than they are capable of quickly paying back.

Unlike spending actual money, a card is just a swipe away. Money are just figures and it is so easy to forget you are dealing with money making one easily overspend. Since you can satisfy your wants anytime, there is a tendency to overindulge. It weakens control over impulse buying and you end up buying more of the things you don't need. Credit cards also makes the cost higher because more often merchants just raise their prices to cover the cost of credit card surcharges that even cash paying people ended up paying.

Which brings me to the question, to owe or not to owe? Not being very good in math myself, I think it might be a good thing to use credit cards for big purchases that you really take note of to finish paying first before buying another one just to have a good credit rating and then reserve it in cases of emergencies. Other than that paying in cash will be fine since I might get in trouble keeping track of debit expenses, too.

So back to the question if I owe money or anybody owing me one? Zero. Maybe depth of gratitude or "utang na loob", I have plenty but that's another story. As for me, cash is still king.