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Financial Samurai

Slicing Through Money's Mysteries

Pay By Cash Or Credit Card? Deciding The Best Way To Save Money

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Whenever you buy something, it’s good to ask yourself whether to pay by cash or credit card? There are pros and cons of each. This article will highlight which was is best.

Pay By Cash Or Credit Card Fixing A Car

After six months of a progressively louder clicking sound emitting from my engine, I decided to take my car in for a free inspection.

After only about five minutes, the auto-mechanic mentioned that he was sure my fan unit was broken and needed replacing. Great. “How much?” I asked.

His brother, the operations manager, got back to me and said, “$925 before tax, which is about $1,004 after tax.” Sales tax is 8.5% in San Francisco.

Phew! I was mentally preparing for some $3,000+ bill because the clicking sound was near the engine. When you go on the car forums, you always read about the worst situations. Here’s a short recording if you’re curious.

The operations manager told me I’d have to come back next week because he’d have to order the entire fan unit. No problem. In the meantime, I decided to do what any rational person would do and check what fan units would cost online.

A bunch of options came up that were 30% lower than the shop’s quoted price. The next week, I gave the shop owner a ring and asked why such a huge price difference. He said the difference was between an original part from the manufacturer and a replica without a warranty.

Sensing his weakness over the phone, I asked him if there was any way we could get the price down. After stumbling through some umms and awws, he responded, “Why yes, if you pay ‘cash cash,’ not check, I’ll knock the price down to $750 out the door.“

“Will I still get a receipt and the warranty?” I asked.

“Absolutely,” he replied.

Enticing! What would you do?



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The Best Type Of Credit Card To Own Is A Cash Back Credit Card

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I only have two credit cards. A personal cash back rewards credit card and my Chase Ink Business Cash credit card. Any more cash back credit cards and my wallet starts getting too fat. When the wallet gets too fat, it’s hard to sit and type Financial Samurai articles. Then my world would start crumbling down.

There used to be a time when I was young, dumb, and broke. I’d buy a lot of things on a 0% introductory interest credit card. I’d then transfer the balance to a new 0% introductory interest credit card a month before the old card’s new usurious rate kicked in.

Getting an interest-free loan for a year felt great and I kept on doing the balance transfer routine until I started making money. Once I was no longer poor, I realized spending all this time opening up new credit cards, keeping track of expiration dates, and purchasing things to get points was a suboptimal use of my time. So I stopped around age 24.

Focus On The Best Credit Cards

Once I started traveling a lot for work, I also cancelled my travel rewards credit cards. Why bother when I was already traveling a fair amount to the coolest places in Asia paid for by my company. The AMEX points racked up into the hundreds of thousands, just waiting for me to buy something I didn’t really need from their selection of goods online.

To demonstrate how much I didn’t care about redeeming my reward points, I made a grave mistake by cancelling my corporate card before redeeming over 400,000 points when I negotiated my severance!

It was only after I had cut up my card and left the office for good did I realize my mistake. Thankfully, I called up AMEX to explain what I did and they let me redeem. I ended up getting a bunch of gas cards and some gifts for my in-laws.



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If Given A Choice, Always Pay By Cash To Save Money

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After some debate between paying by cash or by credit card, I decided to pay $750 in cash to fix my car fan instead of paying $1,004 with a credit card to get points and peace of mind.

By paying $750 cash, I’d save $254 and still get a one-year warranty and receipt. By paying $1,004 with a credit card, I’d only get 1,004 Chase points. This is equivalent to about $10 – $30, depending on how I use them.

The savings difference should make paying by cash a no brainer. However, I always like the convenience of paying by credit card along with its accompanying purchase protection.

I’ve bought some bad products or paid for some bad service before. Once you pay by cash, it’s harder to get your money back. The huge benefit of using a credit card is fraud protection. You can get your money back while they investigate. And this in turn helps prevent that same scammer from victimizing others.

How much would you be willing to pay to have someone fight to get your money back? I’m forever appreciative of a large financial institution for crediting me back $2,000 after my kidnapping in Beijing. If I was just carrying around $2,000 and had it stolen, I’d be SOL.



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