Should You Pay with Credit Card or Cash?
You may be contemplating about whether you should pay with credit card or cash when you want to conduct a transaction. With the era of electronic payments, the use of plastic for paying for transactions is gaining more ground by the day. At times, one may be confused on which option to use. That is whether to use cash or credit card in making payment for a particular transactions. Whether you should use credit card or cash to make payment depends on many factors. And these shall be discussed below:
Pay with Credit Card Versus Cash
- Convenience: If you are talking about convenience, it depends on the angle at which you are looking at it. For instance, with credit card, you can easily carry money around without feeling any weight on you. You can easily conduct transaction online without leaving the comfort of your home. For instance, you can search for restaurants near you on the internet and place order for takeout or delivery. On the other hand, some people find it more convenient to pay cash than using credit card to make payment. I think this depends on your personal preference. Which option is more convenient for you? Is it cash or credit card? Your lifestyle may also impact on the option that is convenient for you. For people that usually buy things from grocery stores, the use of credit card will definitely be preferable. But if you live in a remote village where you can scarcely come across POS, there is no need mentioning that you will need to pay cash for any purchase you make there.
Read Also: Dangers of Excessive Credit Card Debt
- Emergency: There some situations that you will need to make payment very urgently. If you don’t have cash with you, you can be stranded. But with your credit card, you only need to swipe your card and the whole transaction is concluded. On the other hand, if you must pay with cash and you are holding credit card, you may need to look for where to make withdrawal so that you can pay cash. I think for the sake of emergency, it is better to always have cash with you no matter how small the amount may be. Imagine you are traveling and you have a punctured type and you need the roadside assistant. A little bulk in such instance can provide you the needed help at that moment.
- Safety/Protection: If you lost your card or it is stolen, Consumer Financial Protection Bureau enjoins you to report this immediately to your credit card company. If you are able to do this before the thief use the card for any transaction, you won’t be held responsible for such transaction. But if the activity occurs before you report that your card is missing, you may be liable for up to $50 of unauthorized or fraudulent activity. Also, credit cards also offer other valuable protections, such as chargebacks, extended warranties, and price protection. But if you are carrying cash in your wallet and the wallet get stolen, there is every likelihood that you will not be able to recover the cash. Risk of loss is very high with cash.
- Rewards/Bonus: If you use credit card especially reward credit cards, you may be able to rack in some rewards or points on your purchases. You can use your reward for new purchases, airline miles points or hotel accommodation. But if you pay cash, you may lose such opportunity.
- Credit Score: You can’t build your credit score with cash transactions. Cash transactions are not reported to the credit bureaus. But if you use your credit card responsibly, you will be able to build your credit score over time. To get credit card, this will require that you apply for the credit card. It is not automatic that your application will be approved. And if you know you can’t keep to the payment date of your credit card, you might be better off not to use credit card. Missed or late payments will hurt your credit score.
Read Score: How to Build Credit Score Without Going into Debt
- Tracking: For people that find it difficult to track their spending, the use of credit card may be a good option. Every of your transactions is tracked if you use credit card. Except you are very meticulous with figures, you can easily forget how you spend your money if you pay cash. It has happened to me in many times that I will be wondering if I lost my money.
- Credit Purchase: With credit card, you may not need to wait till the time you actually earn your income before you can afford to make some purchases. Credit card allows you to make purchases on credit while you make the actual payment at later date without paying interest. But if you don’t pay off your card balance at the end of the month, you will be charged interest on the balance. Interest rates on credit cards can be very high. If you solely depend on cash, you may need to wait till you actually receive your wages or income before you can carry out such transactions. If you can’t wait, you may need to apply for a loan. You will be charged interest and other processing fees.
- Transaction Type/Acceptability: There are certain transactions that will require you to pay cash. For instance, if you are buying fruits from a local farmer, you can’t expect to pay him with credit card. He will be expecting that you hand over cash to him immediately. Also, there are some retail shops where they specify the minimum amount you can pay with credit card. If what you are buying is less than that amount, you may need to pay cash in that instance. On the other hand, if you want to hire car, rental companies usually request that you pay with credit card. They may not even accept debit card from you. The reason is very obvious. In case you don’t return with their car or you get involved in an accident, they can charge the liability against your credit.
- Spending Limit: For people that cannot control their spending, paying with credit card can make them overspend thereby dragging them into debt. The problem with the use of credit card is that, you don’t actually feel the money leaving your pocket. But if you pay with cash, you can feel constrained to make some purchases. With cash, you can’t spend what you don’t have. So, if you find it difficult to control your spending, it may be better to go out with cash. You must have planned what you want to buy before leaving home.
- Large Purchase: It is easier charging large amount to your credit card than carrying large amount in your pocket. There are 0 apr credit cards that will not charge you interest on your purchases during their 0% apr introductory period. The offer can last between 12 to 21 months. This may be good for people preparing for weddings and cannot wait to save enough for their wedding expenses.
- Small change: If you enter supermarket, you will notice that there are some items with price tags that are not round figures. For instance, if the price of an item is $9.55, you may find it difficult paying the exact amount with cash. You may end up paying $10 as the cashier may not have change to give you. If you buy such item say like ten times in a month, you will have lost $0.50. But if you pay with credit card, you can take advantage of such little discount. You can pay the actual amount with credit card.
- Danger of identity theft: If you pay with cash, you don’t need to be afraid about whether someone will steal your identity. If for instance, you want to pay with credit card in a restaurant, you will have to hand over the card to the attendant. The restaurant attendant can steal your card details without you knowing. Fraudsters also have a way of stealing card information by attaching skimming devices to ATMs. Mere inserting your card into such ATM, your identity could be stolen. That is why it may be dangerous using ATMs in locations that you cannot trust. Also, it is possible that camera has been mounted around the ATM. This can make the perpetrator to still your PIN when you are trying to make withdrawal.
Read Also: Identity Theft: What it Means and How to Avoid It
In conclusion, with the illustrations above, you must have realized that, it may be difficult to say that you will stick to cash or credit card only. You may need the combination of cash and credit card.