Cash or Credit? 3 Reasons to Always Say Credit!

Transcript:

Hey guys, Mike Frontera here back with another Retirement Theory video!

So check this out. This is my wallet. It’s called the Ridge Wallet, and I love it. It keeps everything so neat and compact. All my cards fit in there nice and then on the back is my cash. So if I take this cash out, I’ve got $96. I was thinking about it and I realized that this modest wad of cash has changed very, very little in the last few weeks and so it got me thinking. When was the last time I went to the ATM? I couldn’t even remember.

So, out of curiosity I logged into my bank and I saw that it was December 22nd. Some last minute cash Christmas gifts! Here we are in April and I’ve got the remnants of the $400 ATM withdrawal I made over 3 months ago. Some of which of course went to gifts. Why? Well, because on virtually every single purchase I make, I use my credit cards. And I’m going to give you 3 great reasons you may want to as well.

So the first is your security. Have you ever been victim of identity theft? If you have, you might know that one of the easiest things to fix is a compromised credit card. One quick call to your credit card company and they’ll have a new card out to you immediately with all fraudulent charges taken care of right away. The Fair Credit Billing Act provides protection for fraudulent charges. By Federal law, your maximum exposure is $50. And that said, I’ve lost credit cards, and I've had my credit card number compromised before, and I’ve never had a card company leave me on the hook for anything, let alone $50.

This isn’t necessarily the case with a debit card, by the way. With a debit card, you do have some protections through the Electronic Funds Transfer Act, but they are not as robust. Not to mention, while you fight unauthorized charges, you’re out your own money, not the credit card company’s.

By the way, would you agree it is tough to find a reputable contractor? Have you hired somebody, cut them a check for half the job upfront and then all of a sudden you can’t reach them. Or they do a partial job for you or a horrible job for you. It can be a helpless feeling because they’ve got your money. But, if you pay them with a credit card instead, you maintain recourse. You can dispute the charge. And that is why I’ll always ask a contractor, or any vendor providing me service, if they accept credit cards. If they don’t, it may just be worth moving on.

The second way you can benefit from using credit cards are their rewards. Now, yes, this one might seem obvious, but there’s often more there than you might first realize. Sure you might be able to earn frequent flyer miles, or cash back, and actually a lot of that stuff really can add up.

But, did you know that many cards offer extended warranties on your larger purchases? You go to Home Depot and you buy a riding lawn mower and what’s the first thing they do? “For another $200 we can extend the warranty by a year.” Check your credit card agreement- you might already have coverage for that. Speaking of coverage, I rented a car in Arizona just before the pandemic. Part of my benefits include rental car coverage for free! So I was able to decline the insurance offered at the counter, but still maintain the peace of mind of knowing that I'm covered!

Finally, one of the most overlooked benefits of using credit cards is the ability to effectively track your spending. At Retirement Theory we provide our clients an automated cash flow app that tracks and organizes spending. It’s a great tool, but most people don’t have access to something that comprehensive. However, if they use their credit card for most purchases, a lot of the organizational heavy lifting may already be done. Credit cards often provide great reports, with categories and detailed descriptions of every transaction.

Cash flow is so important, especially in retirement, and credit card reports can make tracking that cash flow so much easier.

Now, I’d be remiss to not mention that using a credit card for every purchase possible is not for everyone. If you tend to let balances build, or you have insufficient cash reserves for emergencies, credit cards can be just as dangerous as they are beneficial. For those who can, and do, pay the entire balance each month, they can offer some very powerful benefits versus cash, checks, and even debit cards.

So, do you have questions for me? Come visit me at www.retirementtheory.com or send me an email at mike@retirementtheory.com. Did you click subscribe on this video or follow me on Facebook? I think that you should. You’ll continue to see videos like these on everything retirement planning. Once again, thank you for joining me, we’ll see you next time.

Sources:

https://www.experian.com/blogs/ask-experian/credit-education/preventing-fraud/credit-card-fraud-what-to-do-if-you-are-a-victim/
https://www.experian.com/blogs/ask-experian/are-credit-cards-safer-than-debit-cards/
https://www.nerdwallet.com/article/credit-cards/credit-card-extended-warranty/

Clips:

Show me the money: https://www.youtube.com/watch?v=FFrag8ll85w

Sex & the City: https://www.youtube.com/watch?v=gAmkHLyXVtU