Cash or Credit - Which One Should You Be Using

Cash or Credit – Which One Should You Be Using?

Digital payments are easier and more convenient to use than ever before. Like other popular consumer items such as Kleenex or Coke, the noun has either become a verb – “Venmo Me” or a catchall term for items in the same category.

However, cash is still the most popular means of paying for purchases and bills across all ages and demographics. People under 18 or who are unbanked carry cash as do Boomers and older generations. Even Millennials who embrace technology still use cash over other forms of payments. This trend is expected to change over time, but for now, cash is far more popular than you might expect. And by cash, we are not including checks – those are quickly becoming a thing of the past.

Should you be using cash over your credit cards? Let’s take a look at why you may not want to give up on cash just yet.

Limits Overspending

If you have trouble with keeping to a budget, using cash can help you not to spend. You have a tangible amount of cash to spend. If you depend on an ATM for cash, you may see some pretty hefty ATM fees that will eat into your budget.

Another great strategy is to give yourself a cash allowance for discretionary spending. When it is gone, it is gone and there is no cheating. It takes a bit of self-discipline, but it can be a very effective way to not eat into your money meant for important things like food and rent.

Using a credit card is a very simple way to fall into credit card debt. It is very simple to pull out the ole credit card and plan to pay it later without a plan to actually do so. The problem is that life events will inevitably occur that prevent you from paying off your credit card balance. If you create and build an emergency fund, use that money for true emergencies and keep your credit card balance at zero.

If you have issues with credit card overspending, cash may be the perfect solution to sticking with a budget.

If you have automatic payments to a streaming service or other vendors, you may want to remove them from your checking account and pay them with a cash-back credit card. It protects your bank account from accidentally getting overdrawn and paying your credit card in full and on time will help you build a good credit rating – something that using cash can not help you with

Protects Against Fraud

It is relatively simple for hackers to steal credit card numbers either over the internet or in person. Cash, as long as you don’t accidentally pick up a counterfeit bill, is hard to hack. Of course, if your cash is stolen, you generally don’t have much recourse to get it back.

Using a credit card usually comes with fraud protection. Fraud protection on debit cards is more dubious, so always place a daily limit on how much money can be withdrawn using your debit card.

Try to keep your credit and debit cards in RFID sleeves or wallets. This simple protection can prevent your cards from being hacked when they are supposedly secure and not being used. RFID sleeves are very inexpensive.

Cash is Accepted Everywhere

Well…Usually. Some vendors, especially in larger cities are going cash-free. A cash-free society means that the till is safe from thieves and cashiers are not required for change.

In addition, you will need a credit card or debit card to purchase plane tickets, hotel rooms, or rental cars. For these types of purchases, we recommend using a credit card because a debit card will have a hold put on your cash, especially for hotel rooms. That hold can ruin a vacation quickly!

On the other hand, if you are making small purchases, using cash makes more sense than a debit or credit card with associated usage fees. If you are using cash, get a receipt. Otherwise, you have no record that you actually paid a bill!

Mobile Payments Are Not As Popular

Mobile payment sites are gaining popularity, but especially with older consumers, there appears to be resistance to trusting the internet with placing the payment properly. Cash still retains a sense of security that the money got where it was going.

If you travel overseas, especially to developed nations, you will find that digital payments are far more popular and common for practically everything. Eventually, that trend will reach the United States. However, given how our banking system and the internet is set up, rural, or marginalized people will be the last to be able to go cash-free.

Cash is not Traceable

In a world where our every purchase is recorded, analyzed, and used to market to us, cash is uniquely untraceable. Using cash and avoiding frequent buyer apps can help you drop off the radar from marketers. Of course, that means that you have to either buy everything locally or travel to make purchases.

As a warning against carrying large sums of cash – if you are stopped by police, they can and will seize your cash as suspected drug or laundering proceeds. It can be a very long and expensive fight to get back that money.

If you are buying an expensive item, you may want to use a credit card (and then immediately pay it off). You may get an additional warranty and purchase protection. Plus you won’t have to carry large amounts of cash. Plus, if you have cashback or a rewards card, you will earn points for your purchase.

Pocket Full of Change

If you’re using cash, get ready to have a lot of change. Set up a change jar and then use the accumulated change for a splurge, pay down a bill, or buy something you have wanted without hurting your budget. FYI – a wine bottle can hold about $400 in dimes!

You can’t do that with a credit card.

Pacific Debt, Inc

If you have overused your credit cards and find yourself deep in debt, you may need more help. If you’d like more information on debt settlement or have more than $10,000 in credit card debt that you can’t repay, contact Pacific Debt, Inc. We may be able to help you become debt-free in 2 to 4 years.


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