Ways to pay

Cash, check, or charge? Depending on where and how you shop, you can choose from a variety of payment methods. In the mall, stores generally accept cash, check, credit card, debit card, or stored value card as payment. But in other shopping situations, like online shopping, you may not have the same options.

Consider the benefits and drawbacks of each payment type, and think about the best ways for you to pay.

Cash

Whether from allowance, tips, or the ATM, cash may be the most familiar option to you. It’s accepted almost everywhere you shop and using it makes for a relatively quick transaction. Also, using cash helps you stick to a budget: if you don’t have the money on hand, you won’t be able to buy something you can’t afford. You also won’t get bills in the mail or see debits on your bank statement.

However, not everyone accepts cash for payment. Most catalogues and online retailers, for example. Also, if your wallet gets lost or stolen, you can’t "claim" or cancel your missing cash as you would travelers’ checks or credit cards. And sometimes you simply need to make a bigger purchase than the cash you have on hand or even in the bank. Maybe you need car repairs, a plane ticket, or a computer for school, and choose to pay for them over time.

Checks

Like cash, checks represent money you actually have, except that checks aren’t subject to some of the security issues that come with using cash. Checks usually have your name, address, and phone number printed on them so only you can use them. (Note: Don’t ever write your social security number on your checks, because it could allow someone else to gain access to your account.) As you write checks, you should record them in the check register that comes in your checkbook. This allows you to keep track of what you’re spending better than you can with cash transactions. Also, if your checkbook is ever lost or stolen, you can have the missing checks canceled and protect yourself from liability.

However, to have checks, you must have a bank account and to have an account, you often need to establish and maintain a minimum balance as well as pay monthly fees and check printing costs. Additionally, overdrawing your account by writing checks when you don’t have the money to cover or writing more than the maximum number of checks allowed per month by your bank can lead to hefty fees and penalties. To avoid this, you must keep diligent records of checks written and withdrawals made from both teller transactions and ATM machines. Also, some stores will not accept personal or non-local checks because of the cost and risk associated with processing them.

Credit cards

There are three types of credit cards:

• Bankcards: issued by a bank or credit union
• Store cards: from department or retail stores that can only be used there
• Entertainment charge cards

Credit cards allow consumers to buy now and pay later. Charge cards, however, must be paid in full every month. If a credit card is reported lost or stolen, it can be cancelled and you will not be held liable for fraudulent purchases made. And, like your check register, your credit card statement provides you with a record of your purchases.

But to qualify for and carry a credit card, you must establish and maintain a good credit history. It is also important to read and understand your credit agreement, because once you accept a credit card, you become legally responsible to repay what you buy with it. There are credit limits, annual fees, minimum monthly payments, and finance charges to consider. Not paying your balance in full every month, or carrying a balance, means that your purchases will cost more over time due to interest. Also, credit cards may encourage impulse buying and overspending and should be used in conjunction with a responsible budget.

Debit cards

Issued by the financial institution in which you hold a checking account, a debit card is an enhanced automated teller machine (ATM) card that includes a point-of-sale feature. These cards will have either a Visa or MasterCard logo on the bottom right-hand corner. Note that a regular ATM card won’t have the Visa or MasterCard logo.

Linked to your checking account, the debit card enables you to withdraw cash from an ATM or use it at the checkout line like a credit card without having to write a check. Payment is completed by entering a personal identification number (PIN) or signing a sales receipt, and the funds are then withdrawn in one to three days. Debit cards combine the convenience of cash and checks with the security and versatility of a credit card.

Debit cards are "buy now, pay now" options versus credit cards, which allow you to pay later or over time. It is important to remember this and not use your debit card for purchases that you cannot cover with current funds. Don’t count on the one to three day processing window either. To avoid problems, make sure you have the money in your account and no outstanding checks or debits at the time of purchase. As with checks, you must keep track of credits and debits to your account so as to avoid overdrafts and the resulting fees. Depending on the store and how they process your transaction, you may pay a processing fee, too. Plus, debit cards cannot be used in all situations.

Stored value cards

If you have received any gift certificates or store credits lately, you may have already used a stored value card. Gift cards look like credit or debit cards but carry no Visa, MasterCard, American Express, or ATM logos and affiliations. Instead they carry store or issuer logos and are pre-loaded with a certain amount of money. You can then use the card at that store (or shopping center, etc.) until the value is used up. Other stored value cards carry a specific acceptance mark and can be used at any merchant location that accepts that type of card. Insurance companies and welfare offices have experimented with this type of card, issuing them instead of claim or benefit checks. These cards have security they can be cancelled and reissued if lost or stolen but also a built-in safety net: you can’t spend more than your limit like you can with credit cards. Many stored value cards can also be reloaded with additional value so they never need to be thrown out or replaced.

Good credit: why it’s important

A large part of managing life involves managing finances. And to keep your financial life in balance, it’s essential to keep your credit under control and as healthy as it can be. Remember, a good credit history is an important part of your financial future. It shows more than just your ability to pay your bills on time it reflects your character. And it can play an important role in getting a future job, car loan, or apartment.

The easiest way to keep your credit rating strong is to use your credit responsibly, pay your bills on time, and avoid reaching your credit limit. Always make at least the minimum payment required, although it is best to pay the balance in full when possible. It is also important to complete all new credit applications carefully, using the same name every time.

Be wary of quick fixes for credit problems. Financial information about late payments, foreclosures, and repossessions remains on your credit report for up to seven years; bankruptcy information stays on for up to ten years. Certain companies advertise that they can "fix" bad credit history, usually for a large fee. However, altering an accurate credit history is legally impossible. If you find yourself in financial trouble, work with your creditors instead to reestablish a credit rating you can be proud of. Want to learn more about credit? Take a crash course in Visa Student’s Credit 101.