Cash or credit card, which is better? I’ve read many opinions that if you want to remain debt free and in control of your finances then never use credit and only use your debit card or cash. There are also convenient options like venmo, applepay, etc. that act as cash in this almost cashless society. Still the question arises, cash vs credit card, which should I use?
There are some very good reasons for using cash vs credit card. If you are not ready to use your credit card wisely then it is probably best to stay away. However, there are also benefits to using credit if you understand it and do not let it get out of control.
Think of it like an all-you-can-eat restaurant. All the food you want is available to you. If you do not know your limits and have not achieved the self-control to stop eating before it is too late then stay away or you will be paying for it later that night and possibly the next day. However, if you are aware of and respect your limits then go ahead and enjoy it. In other words, you don’t need to avoid something as long as you know your limits and have some self-control.
I’ve tried using cash for everything and using credit for everything. Below are some benefits for each.
Cash or Credit Card – what are the benefits?
Benefits of cash
1. No credit card debt
Paying cash for everything will obviously result in no credit card debt. The only way to be absolutely one hundred percent positive that you will not have any balance on your credit cards is to not use them. If you struggle with self-control and are worried you may fall back into the debt trap, then this is a good choice for you to consider.
2. No added fees
Paying cash eliminates the possibility of any added fees. Some companies charge transaction fees when credit cards are used. There are also late fees and interest that are possible extra fees should you miss a payment or make a payment late.
3. Reduces impulse buying
Not using a credit card increases the likelihood that you plan your spending better. Using cash requires you to purchase with intent. You know what you are buying, how much it is and how much cash to bring.
4. Stick to your budget
If you are paying with cash you are more likely to stick to your shopping list and your budget. There is no option for buying outside of your list. You simply will not have the money to pay for it.
Benefits of using a credit card
1. Safety
If cash in your pocket makes you nervous as far as theft or simply losing your wallet, then a credit card is a good alternative. It is much easier to report your card lost or stolen then it is cash. I prefer the credit card to the ATM card for potential fraudulent reasons. I would much rather deal with fraud on my credit card then my bank account.
2. Tracking
Your credit card statement details your spending. Some banks even track your spending categories. This can be very useful when evaluating your spending habits and reviewing your budget. Although you can do this yourself when spending with cash, this information on your monthly statements will save you time and is quite convenient.
3. Perks and Rewards
Many credit cards offer rewards such as cash back, travel rewards, and other perks. As long as your annual fee is not too much and you are not paying any interest on the card, this can be a plus.
4. Builds credit
If you are looking to build credit using your credit card will help you. There are some theories that you must carry a balance on your card but I do not carry a balance on my card and my credit is great. If you use your card and pay it ON TIME every month your credit will build.
Which was best for me? Cash or Credit Card?
We use our credit card for everything that is listed in our budget. Since we have already budgeted for these expenses we are prepared to pay when the credit card statement is due. We have an automatic payment to pay it in full each month which requires us to check our credit card balance throughout the month and ensure there are enough funds available. Because we have a budget we still shop mindfully and curb our impulse buys.
I prefer this way because I only have one payment to make each month instead of six or seven. We also rack up a ton of cashback and travel rewards.
Cash or credit card- summary
As you can see there are benefits to using cash as well as credit. It really comes down to your mindset and discipline. If credit sounds good to you then be honest with yourself and make sure you can handle it. If you feel any possibility of slipping into debt then stick with only cash.
Also, there is nothing saying that you have to do one or the other. Cash or Credit is not a winner takes. Maybe give yourself a weekly cash allowance that can be used for your coffee, nails, movies, etc., and then use your credit cards for your more regular expenses that you have a budget for. Play around with it and find what works for you.
Thanks for reading!
Stay balanced,
Jill