Cash Versus Credit
Ruth Ganley
ACCTG 400
Module 2 Case 6-2
Cash Versus Credit
It’s almost Christmas time and you still need to buy presents for eleven relatives. Although you plan to work over the semester break to earn some extra money, your current cash resources are low --- you have only $250 in your checking account, and you still need to pay your half of the phone bill ($50) before you leave for home. However, you do have a Target card (current balance $1,000) and the lender recently sent you a notice that your credit limit increased by $500 to $1500. Discuss the pros and cons of using your Target credit card for your holiday purchases. What other options do you have?
While every family or group of friends likely has one person with a horror story or two pertaining to holiday credit debt, there are pros and cons to using them during the holidays. Some of the benefits of using the Target credit card include:
* Available funds. The first and most obvious advantage of using a credit card is that it allows you to purchase goods and services without having to pay for them immediately. The Target credit card would provide easy money, making it possible to afford holiday gatherings or purchase last minute gifts.
* Sense of security. The Target credit card would offer far more security for purchases than simply paying with cash. Also, items purchased with the card can make returning or exchanging gifts a far smoother process. Typically, purchases made with credit cards are completely protected, meaning a lost or stolen purchase, while unfortunate, can be replaced at no cost to the consumer.
* Hidden benefits. Many times credit card companies offer incentive programs such as airline miles and other discounts with each purchase, giving consumers more for their money and mitigating future interest payments. Although, I do not think this applies to a Target credit card.
However, just like there are two sides to every coin, there is also a dark side to relying
ACCTG 400
Module 2 Case 6-2
Cash Versus Credit
It’s almost Christmas time and you still need to buy presents for eleven relatives. Although you plan to work over the semester break to earn some extra money, your current cash resources are low --- you have only $250 in your checking account, and you still need to pay your half of the phone bill ($50) before you leave for home. However, you do have a Target card (current balance $1,000) and the lender recently sent you a notice that your credit limit increased by $500 to $1500. Discuss the pros and cons of using your Target credit card for your holiday purchases. What other options do you have?
While every family or group of friends likely has one person with a horror story or two pertaining to holiday credit debt, there are pros and cons to using them during the holidays. Some of the benefits of using the Target credit card include:
* Available funds. The first and most obvious advantage of using a credit card is that it allows you to purchase goods and services without having to pay for them immediately. The Target credit card would provide easy money, making it possible to afford holiday gatherings or purchase last minute gifts.
* Sense of security. The Target credit card would offer far more security for purchases than simply paying with cash. Also, items purchased with the card can make returning or exchanging gifts a far smoother process. Typically, purchases made with credit cards are completely protected, meaning a lost or stolen purchase, while unfortunate, can be replaced at no cost to the consumer.
* Hidden benefits. Many times credit card companies offer incentive programs such as airline miles and other discounts with each purchase, giving consumers more for their money and mitigating future interest payments. Although, I do not think this applies to a Target credit card.
However, just like there are two sides to every coin, there is also a dark side to relying