Small Business Money Decisions: Knowing When to Use Cash, Credit or Debit

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A lot of us have a whole lot of ways to pay for things in our pockets. Take out your wallet and you’ll have a mix and mash of cash, credit, or debit. Deciding on what to use at what time can be a hard time for a small business owner. You have to keep into account a lot of different expenses that aren’t there for the regular consumer. There are a lot of things to take into account when choosing what way you’re going to pay for something depending on what it is.

Differences Between Each

Credit is a great source of financial strength as it allows you to borrow money with the intention to pay it back at either the end of the month, or have to eventually pay interest on it. Debit on the other hand takes the cash directly out of our checking account in the bank. Cash is what you see and what you get. It is right there in front of you and is given and taken for the exchange of a product. What you should use depends on a lot of different factors.

For one, you should have a look at some great credit card options at UpgradedPoints.com, credit cards can offer some great rewards systems for small business owners. Knowing the correct card to choose is an important first step before actually even choosing which method you’re going to use to spend.

Method of Payment Decision

The methods that go into choosing what to pay with what depends on how you’re feeling and whether or not it’s a smart business decision. For example you may want to use your business credit cards on an expensive dinner because it’ll give you additional miles or rewards. It also has the best fraud protection out of any of the methods of payment too. However, another person might want to pay in cash because they simply can’t afford to put more expenses on their credit card.

As one can see in this certain instance it depends on a couple of personal decisions along with financial ones. If we were to look at when to use cash it would come down to a couple of decisions. If you have a lot of credit card debt is already one we covered. A few more show that you’re not that good with paying back bills on time, and can’t control an overall balance.

Debit cards will be used when you’re making a purchase online or you want a detailed record of your purchase. It is also a lot more convenient to have potential thousands of dollars on your books. There are many ways to use a debit card but requires having cash in the bank.

Credit Card Options

Sometimes using a credit card can be a great option or one that isn’t allowed for various reasons. One of those reasons would be dealing with small independent vendors. They might not be able to afford the credit card fee that comes with a transaction. This is simply not an issue when it comes to either using debit or straight cash. Credit cards are great because you have an actual line of what you purchased that can be categorized and then listed for future inspection. Of course, if you have low interest credit cards, then you can put off paying large expenses in chunks.

Business owners will find that there is a lot of benefit to this when dealing with accounting or general expenses of running a business. It is much easier to track spending and be able to either set a budget, or follow one more closely. There are a lot of applications and online resources that will assist you with all of this data as well. They are able to categorize things, sort them and keep you with a proper mindset for the business.

Personal Decision Personified

A lot of these major factors do come down to what the individual person of the business is feeling at the time. For a lot of people they don’t know the inherent benefits for using business credit to buy things and then paying them off later, both earning cash rewards, points, or airline miles in the process. The benefits outweigh the cons if you know how to actually use a credit card responsibly.

Cash is convenient for a lot of people, but psychologically it is sometimes something that is hard to let go of. You can always adapt to new modes of spending with either of these three mediums after keeping mind what inherent benefits they may offer you in the process. Ultimately the decision is yours.

Image from http://blog.quizzle.com/2013/12/credit-vs-debit-charge/

2 comments

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  2. Wow, this is one piece of great information! I have never given so much thought to money decisions. Thanks for sharing!

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