Cash or Credit?

Cash or Credit?: More Canadians opting for credit instead of cash

Cash or CreditFrom a logical standpoint, living within your means should be an easy task, right? If you’ve got $100 in your pocket, and the item you’re eyeing in your favourite store is $150, you’d leave it on the shelf and walk away. Why? Because you don’t have the cash to support the purchase.

However, for many people there is a piece of plastic stuck in the middle of that logic- the credit card. While credit cards offer convenience and the opportunity to buy now and pay later, they also lay a fast path towards living beyond your means.

This week, the Bank of Canada released a study outlining the gap between cash purchases and credit use in Canada. Canadians are reaching for their credit card more than twice as often as they use cash.  The survey also found that debit card use has dropped as well in favour of credit.

The findings of this survey are not particularly surprising, given Canadians’ appetite for online shopping and preference for technological aids to facilitate their shopping experiences (such as ‘tapping’ and mobile payments). While convenience is something that is welcome, there is not much of a gap between frequent credit use and swelling debt load.

“The best and most simple strategy to living within your means is to actually live within your means,” says Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada. “This means setting a budget and sticking to it with cash. Credit cards are an excellent tool to help with convenience, but if convenience translates into carrying large balances month over month, convenience comes at too great a cost.”

If you are one of those Canadians who are trigger-happy with their credit card at the check-out, here are a few things to consider:

Rate your own credit use

How and why do you use your credit card? Do you take it out of your wallet for convenience’s sake or are you using it a little more strategically?

Are you using your credit card to fund purchases because your cash flow runs short?

Does your balance balance out?

Do you charge most of your purchases with the intention of paying them off every month? Does this actually happen?

Talk to anyone who is heavily in credit card debt and you’ll find that a surprisingly large number of them started out with small debts which grew quietly but steadily over time. It’s like ignoring a small fire that could easily be stamped out or contained. If you let it smoulder, then next thing you know it’s a five-alarm fire raging out of control.

If you’re not stamping out that “debt fire” every month, you’re setting the stage for it to grow beyond your control. Rule of thumb: if you are carrying a balance month after month, stop using your card.

Switch the plastic

If you really, absolutely must use plastic at the check-out, use your debit card (your credit card’s cash-equivalent cousin). Debit offers many of the same conveniences that credit cards do, and also offers you the chance to commit to a cash based lifestyle.


Is your credit use giving you cause for concern? Is your debt load growing to levels that you can’t keep up with? We can help! Call us at 1-888-294-3130 to talk to a trained credit counsellor or visit our free debt analysis.

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