Is ‘cash back’ credit card better than cash?

Ask NJMoneyHelp

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Q. Please break up this fight between me and my wife. I always use a credit card for everything so I can get the cash back rewards. We almost always pay the balance in full. My wife uses almost only cash or a debit card. I think she should charge so we can get more rewards. What do you think?
—Spenders

A. That really depends on your spending habits.

All things being equal, you’re right that getting the cash back rewards makes sense, but people who use credit cards generally overspend, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

“I own a car wash and I love credit cards as people do not believe it is real money, and generally spend much more on average than when they pay with cash,” Lynch said.

He compares that to his grandmother, who used to have an envelope with her spending money for every day. She always stayed within her budget, he said.

“My point is that it is real easy to overspend on a credit card versus paying with cash,” he said.

Now let’s do the math.

Let’s assume your credit card gives you 2 percent back and your wife spends $10,000 annually.

“The amount you are talking about is $200 annually,” Lynch said. “Two-hundred dollars is not worth getting into a fight with your wife.”

He recommends you “let sleeping dogs lie.”

Your wife can’t overspend with paying by cash or using a debit card, Lynch said, and that probably saves more than $200 per year in additional spending.

This is not worth fighting over, he said.

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NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.