Introduction
These days, most people use credit cards to pay money more than before. However, some people are still using cash now. Payment methods continue to change with the passage of time. They have different advantages, and people use them properly according to their purpose.
Characteristics of cash settlement
We pay in cash for option contracts, and it is a really convenient payment method. People pay the difference according to the market rate situation, and they cannot get the underlying asset (Shenmare, 2022).
Strengths
・Traders can trade a lot using margins.
・The cost is limited because the transaction is simple and only one.
・There is no security risk due to cash settlement, and cash settlement leads to market activation.
(Shenmare, 2022)
Weaknesses
・Lack of flexibility as the usage period is only during maturity.
(Shenmare, 2022)
Characteristics of credit card payment
Independent people who can manage their own finances generally use credit cards. Cash is not used directly on the spot, and the amount used is paid later, so it is the same mechanism as debt repayment (Schnaubelt, 2019).
Strengths
Credit cards have many advantages compared to cash payments.
・Building trust – All information, such as personal information, when making a card and late payment is reported to the investigative agency. In order to build trust, we need to use credit cards correctly (Schnaubelt, 2019).
・Safety – Information is always protected because it is managed by the credit card company (Schnaubelt, 2019).
・Reward points – There are benefits, such as cashback and coupons (Schnaubelt, 2019).
Weaknesses
・High borrowing costs – Due to late payment, people will have to pay more money than the original amount (Schnaubelt, 2019).
・Overspending – We cannot see how much money we have spent, so we may spend more money than when we pay in cash (Schnaubelt, 2019).
How to properly use cash and credit card payments
Cash and credit card payments have many advantages, so it is difficult to choose one. Each must be used properly for its intended purpose.
How to properly use cash
・When we do not want to pay fees or interest
・When we are afraid to overuse our credit cards
・When we are worried about our budget (If our budget is too big for our credit card limit, cash is a better option.)
(Capital One, 2021)
How to properly use credit cards
・When we want to build trust
・When we want points, rewards, gifts, etc.
・When we need security
・When we go on a trip (Sometimes, there are no fees.)
(Capital One, 2021)
Conclusion
Over recent years, the number of payment methods has increased. In order to use money well, it is necessary to know the characteristics and the pros and cons of each payment method. Understanding them will help us spend our money more effectively.
References
Capital One. 2021. Cash vs. Credit: Which to Use? | Capital One. [online] Available at: <https://www.capitalone.com/learn-grow/money-management/when-to-use-cash-vs-credit/> [Accessed 21 September 2022].
Schnaubelt, C., 2019. The Pros And Cons Of Credit Cards. [online] Forbes. Available at: <https://www.forbes.com/sites/catherineschnaubelt/2019/02/15/the-pros-and-cons-of-credit-cards/?sh=4637783b1e8b> [Accessed 21 September 2022].
Shenmare, K., 2022. Cash Settlement. [online] WallStreetMojo. Available at: <https://www.wallstreetmojo.com/cash-settlement/> [Accessed 21 September 2022].
