When to Use Cash vs. a Credit Card

Estimated read time: 2 minutes

Every way of purchasing items (cash, debit cards, and credit cards) has its own advantages and disadvantages. When individuals know when to use these different payment methods for different needs and utilize all three of them, they can reap the benefits of all three payment methods.

Credit cards are useful in almost all situations. Almost all businesses, even if they are small, now accept credit cards, and it's easy to carry around a plastic card, instead of lots of bills and coins. If you use your credit card at a restaurant, you can effortlessly add a tip. Additionally, you do not have to worry about making sure that you have the right amount of change, and you can earn rewards for every single purchase that you make if you have a cash back rewards credit card. Finally, credit cards are useful for building credit so that later on it is easier for you to buy a house or a car.

Cash can be particularly useful in some instances. There are some locations that are cash only, so it is helpful to have a little bit of cash on hand. Additionally, a couple of small bills are good for tipping bellhops at hotels and paying tolls or parking garage fees if you are traveling. It also can be nice to use cash for small purchases that are less than $5.00. Often times, you will know if it would be helpful to have cash like if you visit the state fair and know you will need cash for some of the food trucks and games.

I personally use a credit card for almost all of my purchases since I have a cash back rewards card. This allows me to earn points on my purchases, which I use later to pay off my credit card bill. It also helps me to track how I am spending my money. In fact, my credit card company even categorizes my spending so I can see in what areas I spend the most. While some people shy away from using a credit card because they want to only spend money they have, I personally like using my credit card because I earn points, and I make sure I pay off my card every month to ensure that I only spend money I have. By contrast, I will use cash in some instances. I normally carry about $20 in cash. Obviously, if a store is cash only, I will use. If I'm traveling, I'll use cash for tips. Finally, I use cash if I'm making a small purchase like a run to the grocery store for milk. I do make sure, however, that I use my credit card–even for small purchases–if that purchase would fall into a rewards category for the quarter like grocery stores.

Both cash and credit cards are useful in different situations. If you need to make a small purchase or tip someone, cash may be the better choice. On the other hand, a credit card can be a great go-to for almost all other purchases, especially if you have a cash back rewards card, and in assisting you in developing a credit history. Credit cards are easy to use, convenient, and beneficial.