Pros and Cons of using Cash or Credit

By: SBQ Staff | 24 Sep 2019

wallet containing cash and creditCash or credit?—Have you heard this question before? It may seem simple, but there is a lot of debate that surrounds this inquiry. Should you pay as you go, or, charge it and pay it off later? There are pros and cons to both. Knowing the benefits can help you make the decision that is right for you. 

Cash Pros:

  • You spend what you have: A simple way to reduce overspending is to pay with cash. When you run out you stop spending. Some people also benefit from seeing their money dwindle as they spend reducing the urge to continue shopping.
  • It can save you money: When making big purchases, there is no better bargaining tool than a wad of cash. If you have ever stepped onto a car lot with cash, you may already know this. Some places also give you a discount for paying in cash, because it saves the service fee that accompanies credit. 
  • Reduced chance of fraud: Every time you swipe your card or make an online purchase, your chance for identity theft is increased. It is true that most card providers will ensure that you don’t foot the bill (often allowing you to simply contest the charges and request a new card), but the inconvenience that accompanies theft is hard to avoid. 

Cash Cons: 

  • Money stolen is money lost: Dealing with a stolen credit card can be a real pain, but stolen cash has little hope of being recovered. 
  • Inconvenience: Paying with cash requires planning and organization. Not just to keep your wallet from being cluttered, but also to ensure that you are carrying the right amount. 
  • Credit scores: To completely cut a credit card out of your life requires that your credit score goes down. Without a credit score, or with a low score, purchasing things like a house, car, even furniture can be more difficult. 

Credit Card Pros: 

  • Building credit: A simple way to build credit is to pay for things on a credit card and pay it off every month. Good credit can be incredibly helpful with large purchases or applying for loans. 
  • Emergencies: It’s hard to have enough cash in the bank to safeguard against an emergency. Keeping a credit card is a good way to feel safe in case the worst happens. 
  • Points: Most credit cards offer their cardholder special benefits for using their card, cashback, special discounts, etc. 

Credit Card Cons: 

  • Overspending: Five dollars for coffee? That’s not too bad – right? Using a credit card can be tricky if you don’t monitor your spending. All of a sudden, your morning coffee begins to add up.
  • Credit card fraud: As mentioned above, credit card fraud is more inconvenient than financially taxing. Even though there are steps you can take to protect your data, some argue that the most effective strategy is to use only cash. 

It may be clear that there is no right answer, only what is right for you and your finances. Some people benefit from the convenience that credit cards provide, while others find it easier to stay on budget when using cash. Which do you prefer?

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