Cash or Credit? How to Decide the Best Way to Pay

Saturday, December 3, 2011 3:05
Posted in category Business & Finance

"Cash or credit?" You probably get asked this question at least once every day, at grocery stores, retailers, restaurants—pretty much anywhere you spend money that accepts both forms of payment. If you have both cash and a credit card (or more) on-hand, how exactly do you decide which to pay with?


Many people believe that the only reason that you should pay for anything with your credit card is if you can afford it right that second. That way, you can enjoy the points and other benefits that come with using your credit card without worrying about adding more and more interest to your balance over time by only paying the minimum payments each month. Instead, you are able to pay off the entire balance immediately and skip all that pesky interest that can accumulate.


There are many advantages and disadvantages to both cash and credit. Let's talk about the advantages to paying with cash:


  • It provides anonymity.
  • Paying with cash can help to prevent overspending. If you only have fifty dollars in your wallet, and that splurge purchase that you weren't planning on purchasing costs sixty dollars, you'll have to say goodbye to that particular impulse buy. On the other hand, if you go with credit, you can plop that credit card down, no matter how out of your budget the product happens to be.
  • Sometimes, paying with credit comes with a more expensive price tag. For example, if you pay your taxes with a credit card, you will incur an extra fee ranging from 1.90% to 3.93%, which could be quite costly depending upon how much you owe. In cases such as this one, paying with cash is your best bet.
  • When you pay with cash, you won't have to worry about paying interest on your purchase, as was mentioned earlier.


Now let's talk about the advantages of paying with credit cards:


  • It's convenient. You don't have to be in-person to purchase something with a credit card. With the increased popularity of online shopping, credit cards are being used for purchases more and more.
  • It's secure. If you lose your credit card, you can call your credit card company, cancel your card, and reorder a new one. However, if you lose cash…well, it's gone, period, and you'll never see that money again.
  • Credit cards can track orders easily. If you order something, pay with a credit card, and never receive your order, you can get your money back. However, if you order something, pay with cash, and never receive your order, you're out of luck—unless the company or individual issues a refund.


Those are just a few pros and cons when it comes to paying with cash versus paying with credit. As you can see, it depends greatly on the circumstances. The best thing you can do is fully understand the pros and cons or cash versus credit and apply your knowledge to each situation as it arises.


Katrina Robinson is a freelance writer and editor based in Charleston, South Carolina. She writes about a wide variety of topics including health, fashion, finance, and credit cards.

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