Cash v/s Credit Card - Which is a Better Option?

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We already have seen and experienced several indications that say we are moving on the path towards a cashless economy. Almost 10-15 years back, the majority of people used cash for transactions.

However, currently, the majority of people use plastic money for transactions instead of cash. The benefits of using a credit card over other payment methods are pretty obvious. Most of all there is convenience. However, it is quite common for those who have faced debt or credit issues earlier in life to keep a distance from credit cards.

Although using cash for making purchases has a few benefits, there are plenty of good reasons that can make you incline towards a credit card. The following points will help you understand how these two payment methods are stacking up against each other. 

Ability to Spend

When you use cash, your spending is confined to all that you have in possession. Alternatively, in the case of credit cards, you are allowed to spend as per the availability, which provides you with an extra purchasing power eliminating the risk that comes when you carry the same amount in the form of cash.

However, choosing cash above credit can still be termed as a good thing. But the studies show that people end up spending more using a credit card as opposed to cash. The reason is that you can only spend the amount of cash available to you, while credit card allows you to spend up to the credit limit pre-decided on it by the bank. 

Ease and Convenience

A credit card gives you a spending ability without the inconvenience of carrying a huge amount of physical cash around with you. One simple card is all that you need to take care of. Moreover, it can fit into your purse or wallet easily. You also get the ease of buying things at the moment and making payment for them in the future.

This offers you some time to arrange the money in case you do not have any currently. If you are paying your bill in full at the end of every cycle, you will not have to bear interest on any of the purchases.

When you make your payments using cash, the chances of overspending are eliminated. You won’t be able to spend more than what you have. Hence, there spending involves no danger and there will be no stress of clearing the bill off at the end of the cycle, which on failure results in the interest amount being charged.

You also get the flexibility of buying things from cash-only merchants and the ones with a minimum spend on a credit card. 


There are many credit cards that offer rewards against purchases made through them. The points earned on the card can be used on hotel stays, airline tickets, merchandise, and cashback. In case the funds are available to you, making use of credit cards for purchases can be worthy of earning the reward points, especially if you are using the physical cash that you would have used for purchasing to pay on the credit card.

The rewards programs also function with cash transactions; however, they are generally retail-specific. They offer very little benefits from other retailers. Such reward programs usually are received in the form of complementary products or services after a specific number of purchases or visits.

Keeping the store credit cards as an exception, the rewards on credit cards are way more versatile as opposed to the retailer-specific cards. 

Needs of the Retailer

Certain transactions such as hotel booking, car rental, purchasing online tickets, etc. need a credit card. In case you live only by cash, booking these services may become a hassle.

These plastic cards offer you the flexibility of easily paying online. If cash is the only mode of payment available with you, you will either have to deposit it into a checking account, buy a prepaid card, or request someone who has a credit card to make the payment on your behalf. 

Protection Level

The policies related to the protection from the credit card fraud limit your obligations towards fraudulent charges that are made on a stolen or lost card. The credit card company will send a new card for you (generally having a new account number) for replacing the missing card.

When you are using, there is no such protection. Once you lose your wallet or your cash has been stolen, consider yourself out of luck, no matter what amount of cash you had with you.

While using a credit card, you don’t just get fraud protection, but also protection from items you did not receive, damaged things, and the things that are not delivered as they were promised.

Whenever there is an issue with the products or services that are bought using cash, the only option is to get these issues resolved with the merchant directly. These plastic cards provide you with the ability to dispute the transactions made in case the merchant is not handling the issue up to your satisfaction. 

Maintaining a Good Credit

The credit Score is one of the important financial aspects of life. The financial institutions make decisions about offering loans and other such services to you on the basis of your credit score along with some other requirements.

Having good credit is necessary if you want to borrow funds for buying a car or house, renting an apartment, or getting a suitable car insurance price.

Unfortunately, when you use cash for these purchases, it will not help you in building a good credit rating. Everything about a credit score is dependent on the way of using your credit. Therefore, a credit card usually helps while starting to build your credit. However, using your credit card in the right manner and with responsibility is obviously the best way of building and maintaining credit. 

Credit Card or Cash- What is the Verdict?

These findings can cause a paradox for some people.

We are rapidly going towards payment methods, which are more convenient and less painful. The stores have been encouraging us to brandish credit cards and using our smartphones for making quick payments with only a click of a button. Cash, these days, is looked upon as something that is out-dated, slows things down, and is suspicious.

In our naeve excitement for convenience and speed, we are adopting these new payment methods without much criticism. However, there are a few downsides to using these comfortable-looking methods. When you compare it to be making payment by cash, people generally overspend, purchase things impulsively, fill their shopping baskets with junk food, and are generally, not very committed towards their purchases. This seems to be mixed news for marketers also.

The message, however, is pretty clear, as shoppers, you need to strike a balance between the convenience in payment and the negative outcomes, which you might suffer as will no longer experience the pain of paying. 

Over to You!

A credit card does not come without its drawbacks. However, if used properly, you can reduce and even eliminate the cons. There is possibly no reason why you cannot have both cash as well as credit cards in your wallet. The cash can be used for making smaller purchases, which does not need credit card protection, while you can use the latter for big-ticket items and for earning rewards.

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