The Different Payment Methods and When to Use Them

There are many ways to pay for something, but what is the best way? Which payment method will help you budget and save better?

Different Methods of Payment:

Credit Card – Debit Card – Cash

When I was in high school, purchasing something meant using my debit card which is where all my cash was stored. I was discouraged from carrying a lot of cash in case I lost it or someone stole it. I believe this thinking still applies today but more methods of payment are now available such as credit card and borrowing from the bank. There is no best way of paying for an item, but we can tailor your paying method to better suit your budgeting needs.

I personally pay for almost everything with my credit card and later fully pay my credit card off. It takes discipline and awareness to do that because I must be careful not to overspend my credit card and avoid going into debt. The reason I use my credit card for all my purchases is because I collect travel points for later use on vacation. It’s also earning me credit history while I spend. It’s important to keep track of my transactions to make sure I can pay it off later.

The Different Payment Methods and When To Use Them

First you must decide what kind of payment personality you have. Below are the main three. Once you know your lament personality, you can tweak your payment methods to better suit your budgeting needs.

The Liberal User

The liberal user and someone who doesn’t think too much about which payment method to use and simply swipes either card at the register. This type of person worries about the budgeting later, once the purchases have been made and it’s crunch time for covering bills and payments. As worry free as it is during the initial purchase, it may be overwhelming when it comes down to paying the bills and organizing your budget at the end of the month. Liberal users tend to “wing it” and go for either payment method at the time of the purchase.

The Conservative User

The conservative user prefers  to use cash or their debit card for purchases and leaves their credit card for emergencies or larger purchases such as home appliances, furniture etc. The conservative user is very aware of their spendings and monitors their account on a regular basis. They are hesitant to use any credit products in fear of going into debt or having to “owe” the bank. They prefer to use their own cash or savings and if there is not enough, they’ll go as far as not making the purchase or waiting for a different time.

The Balanced User

This user is aware of their credit and debit, they are “choosey” with which one they use and consider their options before making the purchase. They choose the options which best benefits their ability to pay for it after. They consider the need vs want, meaning they think about whether they need this particular item or simply want it. They are not afraid to use their credit card and normally leave their debit card account for utility bills and rent payments.

The ideal payment personality is the balanced user because they manage two payment methods and are benefiting from using credit products, gaining credit history, balancing their bank account and learning to manage more than one account at a time. This experience will come in handy later on in life when you’ll be managing a mortgage, car loan, your kids’ school financing and more. It takes discipline and patience to know how each product works, but it’s very beneficial to managing your finances.

Credit cards should be used for bigger purchases, such as appliances, furniture, computers, television, or anything that’s really over a few hundred dollars.

Debit cards should ideally be used for day to day purchases such as groceries, convenience store purchases, etc, monthly bills, and rent/mortgage payments. It’s important to keep the bank account clean and clear cut from miscellaneous transactions to make it easier for you to keep track of important payments.

Cash should be used for miscellaneous items such as gum, bus tickets, etc to avoid “spamming” your checking account.

Of course everyone is different with their payment habits, but it’s important to be aware what kinds f payment user you are in order to better maintain your budgets and help you save!

 

 

Category: CheckingDay to Day BankingSavingsTips and Advice

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Article by: Anna Suzdenkova

Employed in the financial sector for over 7 years. Held various roles including financial advisor, auto claims adjuster and manager of customer service. Attained an accounting degree with Honours. Mutual fund licensed. Passionate about helping people. Forever an optimist, positivity is the key to a happy life. Enjoys helping people decipher the banking world and use it to their advantage!