Paying everything up front maybe scary since you get to absorb the full cost right away. In such an occasion where there will be no price difference in the total cash out against the total of installment plans, getting things at 0% interest is a good deal indeed.

However, if the payment plan involves paying interest, then you have to check how much you’ll have to spend in total.
With larger purchases that would require you to take up a loans (including mortgage) like with car and home purchases, you might be losing quite a lot with interest alone.

For cars, for example, zero down payments and small monthly payments often translate in longer terms and thousands
in interest. Combine that with the money you lose in depreciation and you might notice that you’ll end up paying for two cars.

The best way still is to pay as much as you can up front (full purchase, if possible) and draw it out with prime consideration for your monthly budget so as to minimize the money lost in interest.

Always think of the whole and longer term impact.

I get some perks using my card – points, flier miles, and the occasional 0% installment plans. However, there are perks in using cash too. Some merchants are more than happy to provide discounts for cash purchases since they don’t have to shoulder the bank fees when you use the card.

Here are the stuff I buy using my credit card. I get to earn points and miles on my credit card and merchants often don’t provide discounts when you buy cash.

1. Groceries
2. Small household items
3. When a 0% installment plan is made available.

For more pricier items such as larger appliances and electronics, I usually evaluate whether I go for cash or card. Since they’re pricier, the discounts for cash prices can be enticing.

Even with a 0% installment plan, the discount from a cash purchase can be more than enough to trump the “ease” of deferred payments.

The bottom line still is to only purchase items using your card that you can purchase in cash and that you promptly pay your card statement.

When you don’t have an emergency fund. Emergency funds are crucial as proven by today’s economy. So be sure that you allocate some funds (while continuing to service your debt) to build up your emergency fund at least until you can put up a month’s worth of living expenses. Then you can channel your efforts in debt servicing especially if you’re paying off debt that kills you with interest monthly.

When dealing with fixed rates. Some loans have fixed interest rates for fixed terms. Loans like car loans might give you a fixed rate for a fixed term. Check if you can make early payments that would chip away at the interest. If your loan papers with your bank or lender doesn’t allow such arrangements, then simply maximize your loan terms and have the flexibility to juggle your funds to other efforts.

Credit cards are a no brainer. Hardcore personal finance advisers would tell you that there’s absolutely no need to get a credit card. It’s simply because, often times, you’d be using it buying everyday stuff that you should be able to afford with cash.

Now, larger loans such as housing and cars are different since they often alter the way you spend not only in a monthly basis but in general. Payments will factor in as a recurring expense and you have to adjust your lifestyle if you want to get out of debt fast.

Do the math. Low monthly payments but longer term, means you’ll be throwing away a lot in interest. So the key for large debts is to manage a couple of key factors: the equity that you can afford and the amount you can pay monthly.

The larger the down payment or equity, the lesser the loan (the lesser the amount on which interest will be slapped). The shorter the term, the lower the interest. So the key is to effectively configure them so that you pay as quickly as possible and pay as little as possible per month.

Just make sure that you can afford it before committing yourself to it.

A concession is to have at least 1 credit card for those choice emergencies like when you need to purchase something essential quick and you don’t have cash on hand with you.

With the new credit card law in effect, there are some salient arguments that are for owning a credit card. If you decide to get plastic, here are some of the things you might want to keep in mind when getting and using one.

1. Make sure you know the fee structure. Make sure you know all the fees that go with your card including annual fees, and interest rates. Keep in mind that the new law has prohibited things like inactivity fees so you can keep your credit card in your wallet without getting penalized.

2. Pay monthly and pay in full. This way, you basically just advance your purchases and not incur any charges on interest.

3. Spend only on items where you won’t get discounts paying in cash. This way you get to rack up points and incentives through your card.

My take on the matter is this. I do have one credit card and I use it for many of my purchases. I use it for common purchases such as groceries or when dining out. These are basically spending that’s the same whether I use cash or card. Larger purchases often allow you to get discounts when paying in cash and I use cash for those.

In return, I rack up points that I use to get my annual fee waived and a few miles thanks to my card’s frequent flyer miles program. All the while enjoying the benefit of not having to lug cash around with me every time.