How you pay for purchases or pay your bills matters. Some methods charge fees while others are more likely to lead to overspending. Consider the following common forms of spending:
Cash
Pros
- Ideal for limiting your spending
- Highly accessible
Cons
- Very insecure
- Susceptible to overspending at retail stores without controls (“burning a hole in your pocket”)
- Can’t use online
Debit Card
Pros
- Convenient
- Accepted in person and online
- Limited liability if lost
- No interest charges
- Purchases are limited to the funds in your account (although many consider this a Con)
Cons
- Can takes weeks to recover from fraud
- Studies indicate you spend 15% more with plastic than with cash
Credit Card
Pros
- Convenient
- Accepted in person and online
- Provides a record of all your purchases
Cons
- Studies indicate you spend 15% more with plastic than with cash
- High-interest rates lead to more expensive purchases if you carry a balance
Bill Pay
Pros
- Control over when you send your payment
- Pay anyone anywhere in the country
- Can be automated
Cons
- Delivery dates are estimates, not guarantees
- If payment arrives late, you may be liable for late fees
Direct Debit
Pros
- The creditor or company is responsible for initiating payment
- Can be automated
- Secure payment
Cons
- If you forget about payment, you might incur bank fees for overdrafts
- Payment changes may require four or five business days or more to make
- Albeit rarely if ever, duplicate charges can happen, though are usually immediately reversed.
Digital Wallets
Pros
- Ultra-convenient with access to multiple cards and accounts
- Use online
- Use at many in-person stores
- Earn rewards
- Encryptions mean they are secure
Cons
- Still not available everywhere
- Can’t use if your device is not charged
- Rewards may include transfer fees
- Convenience leads to overspending
