There has been a debate over using cash versus a credit card for some time now with neither coming out on top. A large number of arguments are present for both sides and the answer depends on who you ask. In this post, we will take a look at the two payment methods and why some people like credit cards and why some prefer cash.
The Case for Cash
In terms of the history of finance, credit is a relatively new concept. Therefore, many people would rather to the traditional paper money because that’s what they’re comfortable with. Here are some of the best reason to pay with cash:
Whenever you go out to a restaurant or establishment, there are times where they do not accept a certain type of credit card. Cash is accepted anywhere and establishments won’t decline cash payments.
When you don’t see your money disappearing, it can be easy to overspend. However, with physical cash in your wallet, the likelihood of you not noticing your money disappearing is very low. Many people prefer to use cash only because it helps them keep track of how much they are spending.
No Interest or Fees
Credit cards, depending on which ones you get, tend to come with some type of fees. Even free credit cards that don’t have an annual fee to pay may still accrue charges if you spend too much or if you hold a balance on your account. With cash, you don’t have to worry about any fees or interest.
Freedom From Debt
With cash, it is much harder to fall into debt. You can still overspend and end up having no money left, but you aren’t borrowing any money, which leaves you free from owing creditors.
No one has ever had their identity stolen by leaving their cash behind. Credit cards can be the key to your personal financial information, but money is just money. You don’t have to be concerned about fraud when you spend cash.
The Drawbacks of Using Cash
Paying with cash comes with some disadvantages, too. Here’s what you should consider before using this traditional method of payment:
Cash Doesn’t Provide Theft Protection
Although your information isn’t out there on the internet for a criminal to steal, that doesn’t mean using cash will fully protect you from someone trying to steal your identity. For example, if you misplace your wallet, criminals can still steal your identity through your driver’s license, etc.
Cash Is Hard to Track
With a credit card nowadays, banks and financial institutions tend to have a companion mobile app or an online platform where you can easily access and track your spending. The only way to track your cash use is through receipts. This requires you to hoard receipts and that can get disorganized quickly.
Benefits of Credit Cards
The average indebted U.S. household holds $7,996 in credit card debt according to studies. Although credit cards allow you to purchase things you can’t get enough cash for, they have better uses that can actually benefit you in the long run.
As mentioned, with a credit card, you can make a big purchase without having to carry around a large sum of cash. With this method of payment, you can make a purchase and then spread it out over a longer, more manageable period of time.
Some credit cards even come with the possibility of extending your warranty on a product and purchase protection on eligible purchases. If you’re prepared, you can always lean on your emergency fund instead of charging more to your credit card.
With credit card issuers nowadays, they have some sort of method for their customers to track their spending. This can be in the form of a mobile app or an online website that customers can use to see all of their finances.
On top of seeing your statement whenever you want through an online platform, you can also get a physical statement at the end of each month. This allows for easier tracking and you can see if there are any suspicious charges on your account.
A credit score is an important tool to see how trustworthy you are when it comes to some type of loan or credit card. Whether you need to get a student loan or turn the utilities on in your apartment, you are going to need credit. The only way to build your credit score is through the use of a credit card.
One of the best bonuses to having a credit card is earning rewards through your purchases. Whether you want discounted or free flights, cash back, or gift cards, there are credit card that will reward you in all of those things and more.
Although we mentioned that safety was something that comes with cash, credit cards still come with their own form of safety. The issue with cash is that if you lose it, it is gone. However, with credit cards, you can cancel a stolen credit card and not lose any money. Also, if it were to fall into the wrong hands, you will be responsible for a small amount of the fraudulent charges.
The Drawbacks of Using Credit Cards
Before you decide to go completely cashless and use only credit card as your only form of payment, there are some things you should keep in mind. If you’re debating between using cash or credit card, remember that not every merchant accepts all credit cards, for example. Here are other drawbacks you should consider when it comes to using credit cards:
You Tend to Spend More With Credit
As mentioned above, you will spend more money with a credit card because you don’t physically feel your wallet or purse getting lighter from cash use. When you use a credit card, you are more likely to overspend on purchases because you can’t physically see how much you are spending. You won’t be able to see how much you spend until you receive your bill.
You Must Apply for Credit
Before you can even start to use credit, you must apply for a credit card. There are all kinds of credit cards that require different things from the client. This makes using credit even harder because you must get accepted. If you have little to no credit history, consider a secured credit card to rebuild your credit.
Regardless of whether you choose to use cash or credit, both have their upsides and downsides. Keep in mind that if you plan on making larger purchases in the future, credit is a very important to be able to do so. Even if you prefer cash, you’re goign to need to borrow money sooner or later. For more posts like this, check out our list of bank guides!