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6 Reasons Why Using Cash Is Better Than Credit

Reasons Why Using Cash is Better than Credit

In today's fast paced world, it's easy to pull out the good 'ole credit card to pay for purchases.

After all, pulling out the cash, counting it, handing it over, and then waiting for change simply takes forever!

OK, so I'm exaggerating a bit, but you get the point – it might seem inconvenient to pay with cash, or easier to pay with credit. However, the next time you go for the credit card, consider the following benefits of using cash instead of your card.

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1. Accrued interest adds up on credit cards

If you don't pay your credit card balance in full each month, then the interest you accrue on your purchases will end up costing you more than the original purchase.

With time, that $50 pair of shoes could end up costing you $100 or more, and the bigger the balance, the more interest you're charged and accrue over time. Interest compounds, so you're actually paying interest on the interest you accrue each month, as well.

2. Paying with cash vs. credit helps you keep your debt in check

It can be easy to get into debt, and not so easy to get out of it. In addition to paying more in total for purchases over time, you're also accumulating more debt if you don't pay your bills off from month to month.

Wouldn't it be nice to think that once a purchase is made, you're done with it done and won't be paying on it for months – or even years – down the road?

6 Reasons Why Using Cash Is Better Than Credit

The next time you go for the credit card, consider the following benefits of using cash instead of your card.

3. Cash makes it easier to budget and stick to it

When you pay with the cash you've budgeted for purchases, it's easier to track exactly how you're spending your money. It's also an eye-opener and keeps you in reality as to how much cash is going out vs. coming in from week to week or month to month.

These are just a few of the reasons why it's better to pay with cash vs. a credit card. That's not to say there's not a time or place to use a credit card, but you want to be responsible when you do and have a plan to pay it off within a specified period of time.

4. You avoid additional fees

Using a credit card can result in additional expenses you did not anticipate. Some fees you will avoid by using cash instead of credit include: 

  1. Annual Fee: This fee can range from $95 - $500 a year to use some credit cards. This fee will be reoccurring in most cases, or it will occur one-time during the first year of the credit card’s use.  
  2. Late Payment Fee: When using credit, you can be penalized for not paying off your card on time. Each late payment can result in fees starting at $15, which can increase if the payments continue to be missed.  
  3. Balance Transfer Fee: This occurs when you move debt from one credit card onto another. This fee can range from 3-5% per transfer and will often have a minimum amount associated with it.  
  4. Foreign Transaction Fee: Many credit cards will trigger an additional fee of around 3% per transaction when purchases are made outside of the U.S. 

5. Not all vendors accept credit cards

Although many spots do accept credit cards, not every business will. Farmer's markets and bazaars that cater to small businesses cannot always support credit transactions. In addition to this when you travel abroad you may have to default to using cash. As many countries like Japan still rely heavily on cash transactions, and not all credit types such as American Express are accepted. 

6. Your personal information is protected

Everyone has found themselves in a situation where they have needed to swipe their credit card in a high-traffic area like a gas station only to discover a fraudulent charge on their account shortly thereafter. When you default to using cash, this is one less thing you need to consider as no one can steal your personal information through your purchase.  

Using debit cards vs. cash

On a final note, if you use a debit card regularly, it's also good to keep track of what you're spending, as it's not uncommon for people to use their debit cards and overdraw their accounts. You might choose to use your debit card for certain monthly purchases or bills, but use cash for most day-to-day spending to help you keep that budget and balance in the green.

Author Bio


Since 1937, PrimeWay Federal Credit Union has been a not-for-profit organization dedicated to providing superior financial services to members in the Houston area. We offer more personalized services than you'll traditionally find at more conventional financial institutions. Our hallmarks are low interest rate loans, higher dividends on deposits and excellent member services.

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