The first reason that cash gets you a better deal is obvious. When you pay cash for an appliance or a used car, you avoid the 24 to 72 months of finance charges for the loan or credit card transaction. Even if a merchant says that "you can save 10% today by signing up for our store card rather than paying cash," over 90% of those who sign up will end up taking over 6 months to pay off the items, thus they will pay the merchant back that 10% and then some.

Imagine buying a car. When you buy a used car for $5,000 and pay cash, you have paid $5,000 for the car. Putting it on a car loan could bring that total well over $6,000 through the life of the loan, let alone that by the time you pay off the car in 6 years, you may need a new one (or have had to purchase a new one before the loan term ends!).

The other reason that a cash deal is a better deal is in the timing. If one exercises patience with the buying process rather than getting swept up in the hype of buying that new appliance or car, then when a great deal comes along, they can pounce on it and save even more.

For example, my wife and I are looking forward to taking a trip to Chicago by Amtrak train this coming December to do some Christmas shopping. I could jump on board with a hotel and put it on the credit card. The rooms right now are going for about $119 per night at that time. If I put it one the credit card and pay it off by March, the room has now cost me over $130. If it takes me a year, that same room has now cost me nearly $145. But, if I'm patient and look out for the great deal with cash on hand, I can get a room for a little as $79 in the next 60 days or so. If I paid cash for the room, how much did it cost me in total? $79.

"Rich" folks understand how this works. Cash and timing are the best ways to garner the best deals. Those with credit lines and the need for instant gratification will always be paying the piper.