*With the numerous payment options available today, choosing the correct payment vehicle can be a trauma in itself.* Although the answer is usually one of common sense, there are some factors to consider that can enhance your day-to-day money management. *FEATURES OF EACH FORM OF PAYMENT* *Credit cards* can get expensive, even if you pay in full each month. This happens if the "APR-ANNUAL PERCENTAGE RATE" is applied to charges you make as you make them, rather than on the balance at the end of a given period. Cards provide 1) limited risk if you are robbed, 2) a free loan for a few days (if you have a card that calculates the APR based on the balance at the end of the month,) and 3) insurance if the item is defective or brakes. While traveling abroad, credit cards often give you the best exchange rate. Friends who bought an expensive glass sculpture in Italy, after being plied with wine, got the charge canceled, when they complained. If they had paid cash, they'd have little recourse. *Debit cards* are cash with the safety and convenience features of a credit card. The money comes directly from your checking account. The cost depends on the transaction charges. Check with your bank. Because you must have enough balance to cover your purchase you avoid piling up debt, but you also eliminate the free float you get with a credit card and a check.. *Checks* have safety protection even if stolen by a forger. Unless you were negligent, the bank has the responsibility to verify your signature and restore your balance. But checking costs can add up, i.e., cost per check, monthly service charge, over draft fees, bounced check costs. Balancing your check book can be a nightmare when only statements, not the canceled checks themselves, are sent back to you. *Cash* helps you spend less. This fact is backed up by almost all financial behavior studies. The fear of "running out of cash" can be akin to getting yourself lost in a dark forest. You will take precautions in the form of buying less. But with cash, there is not much of a record of payment, unless you carefully keep all receipts. You rarely ever want to send cash through the mail, and if you carry it and are robbed, there is no hope unless the police find the crook. *7 QUESTIONS TO ASK YOURSELF BEFORE YOU PAY* 1. *Might I want to return the item?* HOWEVER YOU PAY, KEEP THE RECEIPT. 2. *Do I want purchase insurance?* CREDIT CARDS ARE BEST. 3. *What will the service charge, interest payment etc. cost for the method of payment?* KNOW HOW YOUR CARD COMPANY AND BANK OPERATES. 4. *Am I prone to pay on time? Get over drawn? Pile up debt?* IF HABITS ARE GOOD,USE A CARD. 5. *Am I in danger of impulse spending?* IF YES, USE CASH. 6. *Do I need a good exchange rate?* IF YES, USE A CREDIT CARD. 7. *Do I need complete payment records, i.e., the purchase will be deducted from my taxes as a business expense?* IF YES, USE A CHECK OR A CARD. *KNOWING YOUR PAYMENT STYLE HELPS SAVE MONEY* - List your major monthly bills and decide whether to use a credit card or a check to pay them. Most likely, you are best off with a check only policy to eliminate the danger of accruing a large credit card balance. Set up a separate checking account for monthly bill paying. It avoids confusion and overdraft charges, particularly with joint accounts. It will also make life easier if you decide to pay through the web. - Isolate large purchases that may need to be returned or financed. Use a credit card and decide in advance when you plan to pay off the charge. - Use credit cards for catalogue and web buying. You may need that insurance, and other consumer protection features. - If you plan to buy groceries, clothes or other necessities, use your debit card. Be sure you have made enough of a deposit before you shop to make you aware of your spending budget. - Pay cash for everything else, including daily incidentals, restaurants, and impulse buys, unless the costs are tax deductible. It will help you contain your spending. - Steer clear of the ATM machine except for true emergencies and well planned withdrawals. _Easier said then done?_ You bet. But even a small change in your habits means big change in your pocket. *REALITY BITES* *Q. What do you think of paying bills on the net?* A. We'll eventually all do it. For now, check out the fees, and set up a separate account so that if there is a breach of security only a small amount of your money is vulnerable. *Q. How long do I need to keep records of paid bills?* A. If you think that a tax audit or a problem is possible, keep records for 5 years. There are services that will create a database of your records for storage so you don't have a paper avalanche. *Q. I used a credit card to pay for an antique which was a phony. Does the credit card company cover me?* A. Probably not. Most insurance is for breakage and theft. This is fraud and is actionable against the perpetrator. Still, the insurance feature is offered to enhance the good will of the credit card company. Give them the opportunity to decide. They may agree to cover you. _Adriane Berg is an attorney Counsel to the New York and Morristown, New Jersey Law fiorm of Riker Danzig, specializing in elder law and longevity. Her latest book is, *"How Not To Go Broke at 102:Achieiving Everlasting Wealth,"* Wiley 2005. In her parallel life, Adriane is a travel journalist specializing in soft adventure and luxury travel._ ==== Read More