Cash vs. Credit Card: The Original Paper or Plastic Debate

Learn the facts of the cash versus credit payment game.

The debate on cash versus credit card has been going on for some time with no clear winner: Which is a better payment method, cash or credit? Paper or plastic? A number of valid arguments exist for each side, and the answer depends on who you ask. Here’s a look at the two payment methods and why some people are all about credit cards and some people prefer to stick with cash.

The Case for Cash

Credit is still a fairly new concept within the history of finance, so many people would rather stick with paper money than charge purchases to credit cards. Here are some of the best reasons to always pay with cash:

Widely Accepted

You won’t usually hear someone say, “Sorry, we don’t accept cash here.” Cash is universally accepted — except online, technically — so you’ll always be able to make purchases, which is convenient. Credit cards, on the other hand, aren’t always accepted at every merchant.

How to: Deposit Cash to an Online Bank Account


Sometimes it’s easier to spend money when you don’t see it leave your bank account. When you have a wallet full of cash, on the other hand, you watch it disappear as you make purchases. Many people prefer to use cash only because it helps them keep mental tabs on how quickly their money is running out.

No Interest or Fees

The great thing about making purchases with cash is you pay the item’s cost — and that’s it. You don’t have to factor in interest payments. You also don’t have to worry about racking up late fees at the end of the month because there’s no bill — you’re always paid up. Paying cash makes things much simpler and less expensive, overall.

Freedom From Debt

With cash, it’s much harder to fall into debt. You can still overspend and end up totally broke, but if you never actually borrow any money, at least you don’t owe creditors — or more money in interest — at the end of the day.

See: How Much Debt Americans Really Have


No one has ever had their identity stolen by leaving their cash behind. Credit cards can be the key to your personal financial information, but money is just money. You don’t have to be concerned about fraud when you spend cash.

The Drawbacks of Using Cash

Paying with cash comes with some disadvantages, too. Here’s what you should consider before using this traditional method of payment:

Cash Doesn’t Provide Theft Protection

If you carry cash and you misplace your wallet, your only hope of recovering the money is someone turning it in.

Check Out: Types of Credit Card Fraud Protection

Cash Is Hard to Track

If you’re trying to track your expenses and don’t like hoarding receipts, you might find it challenging to keep track if you pay in cash. When you use credit cards, you get a statement each month that tracks what you’ve spent. Log into your credit account online and you can typically see charges almost immediately.

Some Purchases Require Credit Cards

When you’re shopping online, paying with cash isn’t an option. If you don’t want to use a credit card, you can use debit card instead.

When to Use Cash

Many times, it’s advantageous to use cash, and some purchases are just easier to make with cash. For example, if you buy some Girl Scout cookies, unless your neighbor’s daughter has a card reader with her, you’ll need cash or a check. Here are other examples of when to use cash:

Use Cash to Reduce Overall Spending

If you know you’ll be tempted to overspend — or you just want to make absolutely sure you stick to your budget — pay with cash. Take only the amount you’ve budgeted when you shop so you won’t be tempted to add extra items to your cart.

Use Cash to Support Small Businesses

Each time you use your credit card to pay for a purchase, the business pays a fee to the card issuer for processing the transaction. If you’re making a small purchase from a local business, like a morning bagel on your way to work, the cost of a credit card transaction for such a small item can eat up the narrow profit margin, which might lead the merchant to raise prices. In addition, some businesses might offer a discount if you pay with cash.

Related: 9 Businesses That Are Still Cash-Only

Benefits of Credit Cards

The average indebted U.S. household holds $7,996 in credit card debt, according to WalletHub’s 2017 Credit Card Debt study. Aside from being able to buy things you can’t actually afford — which isn’t necessarily an advantage — here are some of the best benefits of paying with a credit card:

Large Purchases

Imagine if every time you needed to make a big purchase, you had to wait for weeks or months until you had saved up enough to buy it. This might be doable when you decide to upgrade your TV, but what if your car needs a new transmission or if there’s a hole in your roof at home? You can’t afford to wait.

Credit cards allow you to make purchases and then spread out the cost over a longer, more manageable period of time. Many credit cards also offer extended warranties and purchase protection on eligible purchases. So if you use your credit card to make a large purchase on something with a warranty, the credit card could extend that warranty for up to three years, for example.

If you’re prepared, you can always lean on your emergency fund instead of charging more to your credit card.

Expense Tracking

Another problem with cash is there is no record of where it went unless you hold onto every receipt. Credit cards, however, present you with a paper trail of transactions every month in your statement. This makes tracking and understanding your budget a whole lot simpler and also alerts you to any suspicious charges.

Credit Score

It’s hard to get by in today’s society without a credit score. The credit rules might not be fair or make sense, but whether you want to obtain a student loan or turn the utilities on in your new apartment, you’re going to need credit. Of course, the only way to build credit is to use credit.

Learn: How It’s Possible to Have a Perfect Payment History and Bad Credit


Credit card rewards can make you spend more than you should, but, if used responsibly, a credit card that offers rewards could earn you some extra cash — or even a free flight or trip. If you buy your gas with cash, you won’t get any money back; but if you use a gas rewards card, you could get 1 to 5 percent cash back, for example.


Yes, this was an argument for cash, but credit cards have their own benefits when it comes to protecting your money. The problem with physical money is that if you lose it, it’s gone. That’s it. Credit cards, on the other hand, are just pieces of plastic. If you lose yours, you can cancel it and not lose a dime. Plus, if it does fall into the wrong hands, you’ll be liable for very little of the fraudulent charges, if any. Your liability is capped at $50 if you lose your credit card or it’s stolen — and if you report the theft to your credit card company before any transactions occur, you won’t be liable for any fraudulent charges. In addition, many credit cards offer zero-liability policies.

The Drawbacks of Using Credit Cards

Before you commit to a completely cashless lifestyle, understand the cons of using credit cards. If you’re debating between using cash or credit card, remember that not every merchant accepts all credit cards, for example. Here are other drawbacks you should consider when it comes to using credit cards:

You Tend to Spend More With Credit

When you pay with cash, your wallet is literally lighter when you’ve finished your transaction, which should make you more conscious of how much you’re spending. When you pay with a credit card, you are more likely to overspend on purchases because you have time between making the purchase and paying your bill. You might not realize how much you’re spending when you use credit — until you get that bill.

You Must Apply for Credit

Before you can use a credit card, you have to apply for one. If you have bad credit, you might need to get a secured credit card to rebuild your credit.

A secured card requires you to make a refundable deposit that guarantees your debt. You might not want to get the credit card requiring a deposit of $500 or more if money is tight and you need the cash for your emergency fund.

Using Credit Comes With Credit Card Fees and High Interest Rates

Credit cards interest rates, along with fees, can offset any rewards you earn. If you always pay your balance on time and in full each month, you’ll have no issue with rates and fees.

But if you don’t pay your balance on time, be aware that the maximum first-time late payment fee is $27 — and if you pay late more than once in a six-month period, the penalty jumps to $38. At those prices, it’s easy to see how you can offset any rewards you’ve earned if you don’t pay on time. Plus, interest charges can pile up fast, too, if you don’t pay off your balance each month.

Check Out: Things You Should Never Put on a Credit Card

When to Use Credit Cards

Despite its drawbacks, using credit cards can be beneficial in many cases. Here are some situations when it’s ideal to pay with a credit card:

Use Credit to Rack up Rewards

Many rewards credit cards offer a range of incentives, including cash back, airline miles and gift cards. When you use cash-back credit cards, you’re essentially getting a discount on every purchase you make. If you can control your spending — and you’re going to spend the money anyway — get rewarded for using a credit card.

Use Credit to Build Your Credit

If you pay for everything in cash you won’t be able to improve your credit score. Even paying for purchases with a debit card won’t help you build credit.

Each month that you pay your credit card bill on time, however, an on-time payment is added to your credit report, which boosts your credit score. Your credit score is based 35 percent on your payment history, so it’s crucial to pay on time.

Related: 10 Best Credit Cards for Building Credit

Use Credit for Insurance on Large Purchases

You already know that putting a large purchase on a credit card could be worth rewards or miles, but it can also give you some peace of mind. Some credit cards offer extended warranty protection on purchases at no additional charge. For example, Discover offers up to $500 in coverage if any of your purchases are damaged or stolen within 90 days.

Cash vs. Credit Cards: Both Are Here to Stay

Regardless of whether cash or credit is best, getting along in today’s world without using some type of credit is very difficult. Even if you prefer cash, you’re probably going to have to borrow money at some point — even if it’s not necessarily on a credit card. Things could change in the future, but for now, credit isn’t going anywhere. And neither is cash.

Casey Bond and Michael Keenan contributed to the reporting of this article.

  • Ashely

    Saftey: It is true, that id you lose your physical money it’s gone, but at least you know it’s gone right away. Who knows how long it would take to discover you were the victim of identiy theft.

    Large Expenses: That’s what Savings accounts are for. Or if it’s really an emergency, you could borrow money from friends/family who won’t charge outlandish intersts

    Expense Traking: Debit cards usually provide the same tracking, and if you pay attention you can make a log of where you spent your money.

    Credit Score: An unfortunate truth. I have no credit and it is very difficult to rent an appartment, however I won’t give in. If everyone stops using credit then they’ll have to change the system. It may not happen in my life, but I will put up with the inconveinece if it means my children never have to borrow to prove that they are responsible.

  • Teresa Eastoe

    Why should I pay to support the credit card companies with every purchase I make? The business pays to take credit and the costs are passed on to the consumer.
    Save for large purchases and if you still want and need it after saving then and only then is it a purchase you should make.
    If you can not track your spending then you are spending too often
    You do not need a credit score if you always pay cash