A look at the pros and cons of various money cards such as cash and credit cards, retail cards and gift cards.
Photo by Psuedo-Funny Screencaps featuring The Simpsons
Though it’s been often argued that card holders end up paying more than those who pay cash for their purchases, money cards do have some good features. It may be worth exploring them here.
In the past few years, it seems like money cards have overtaken cash as a way to pay for purchases — and no surprise there, it’s pretty convenient to use them. I actually carry along a number of cards, including membership cards to stores. These financial tools are wonderful for their rewards and their convenience, but be very careful about the downside! Let’s take a closer look at the types of cards that are out there, how they can benefit us and what things we should watch out for.
Debit Cards and ATM Cards
The Pros: Debit cards top the list for me. I can pick up a few things at Walgreens and swipe my card for fast transactions. The money’s taken out of my checking account, so I don’t have to worry about interest rates or finding the ever-elusive coins at the bottom of my purse. Of course, I have to watch out that I don’t exceed my balance or the bank might impose an overdraft fee on me. And I can always use my debit card at ATMs to get cash on the fly.
The Cons: There are some concerns with using debit cards, including the fact that you may be ultimately responsible for how your card is used (legitimately or otherwise). Unlike with credit cards, there is no extra buffer to protect your funds, and no company to turn to (other than your bank) if problems arise. Also, there may be restrictions with using a debit card for making reservations for a variety of things such as hotel rooms, rental cars and so forth. Merchants often place a hold on your money to book reservations, thereby freezing some of your funds until the hold clears. Ah, the price of convenience!
Now if you want an alternative to ATM and bank debit cards, then why not take a look at the MoneyExchange RevolutionCard? You can get one by opening an account with Revolution MoneyExchange. If you’ve got funds with this online payment management system, then you can use their card to access your money.
I just got my RevolutionCard in the mail the other day, and I can use it at ATMs and at participating stores like Office Depot and Belk. Since it’s not directly withdrawing funds from my checking account, it adds another layer of security to my purchases, and I’m not paying finance charges as with a credit card.
The Pros: A credit card like Mastercard, Visa, Discover, or American Express can be quite handy for tracking expenses. I love how my credit card company itemizes my transactions on its website, an option that is helpful to me when I do my expense reports. In addition, my credit cards have helped me out in the past when I needed to buy big ticket items like airplane tickets, car rentals, and those unanticipated car repairs that crop up.
There are some great rewards programs for credit cards out there which offer cash back and rebates when you spend. Also, I’m sure you all know someone with tons of frequent flyer miles thanks to their credit cards. Not only that, my cards are a big help when I buy gifts or books on the Internet — according to Bankrate.com, our cards provide protection from fraud and zero liability in the event of theft.
The Cons: I’ve also gone to the mall, seen a sweater I had to have, and whipped out the plastic. Those cute duds can add up once I take into consideration the 9.99% interest rate of the credit card. The next time I hear the siren song of Macy’s and its clearances, I need to make sure my purchases are worth the finance charges I’ll face later.
Photo by Psuedo-Funny Screencaps featuring The Simpsons
Retail Cards or Department Store Cards
The Pros: Back when I was in college, I had a retail card for a clothing store and one for an electronics store. They gave me a discount off my purchases the day I signed up and the stores sent me advance notice of sales. In general, it’s easier to establish credit by signing up for department store credit cards as the application requirements are easier to fulfill than those of regular credit cards. Also, the rewards programs and store credits available to you as a retail card holder can be enticing.
The Cons: If I were to sign up for these offers again, I’d check the interest rates first, then the other benefits. The APRs are pretty high for these cards, so be careful about carrying a balance on your card. I’d also keep a limit on the number of cards owned, especially since it’s so tempting to use these cards to buy merchandise with no interest charged for some period of time. For instance, Best Buy offers 90 days no interest on their purchases and no annual fee, but I’d want to know what the minimum payments are before I rush out to get a flat-screen TV.
Gift cards have gotten popular around the holidays and birthdays. In the last few years, we’ve gotten gift cards from relatives and friends on different occasions. Borders even lets you customize their gift card with your photos. It certainly beats standing around in the store, wondering what to get for the family who has everything. On the downside, you have to remember to take the cards with you when you go out, and some cards may lose their value after a certain amount of time. Check the back of the card for a website or phone number to verify your balance.
Prepaid cards let you load money onto them. For instance, a prepaid Visa Buxx card would be great to hand over to a teen for clothes shopping. My prepaid cell phone can be loaded with cards that are widely available at places like grocery stores and convenience stores. Got gaming fans in the house like I do? They might want to use a Wii Points card, a Playstation Network card , or an Xbox 360 Live Points card instead of badgering you for a credit card when they want to buy games online.
Another type of card that gives me benefits are those membership cards to the stores I frequent. Some cards, like the Barnes & Noble Membership card, give you a discount on your purchases. Supermarket chains like Kroger, or Costco, Sam’s Club and other wholesale shopping clubs also offer card programs that reward you for being a loyal shopper. If you travel a lot, you might be able to save money by signing up for a hotel’s rewards program — ask before your next trip.
The next time I go to make a purchase, I’ll have a few choices for my payment thanks to the money cards in my purse….but I’ll make sure to use these cards prudently: I’ll limit the number of cards I own, and limit any balance I carry (or eradicate it altogether) every month. Better yet, it’s best to limit their use. 😉