Cash versus credit seems to be a huge debate. Personally, I can see both sides, though I do have my own preference. Here are some of the pros and cons of only using cash for spending.
Pros
No Debt
With only cash you cannot overspend because the most that you can spend is exactly what you have. This helps you avoid debt. If you have $500, but what to buy something that is $600 and you only have cash, it is not possible. Credit cards tempt you to spend more than you have because you think to yourself that you have a month to get enough money to pay it off, but what happens if you are unable to get that extra $100? You now have debt.
Don’t Owe More Than You Spend
By only spending cash, you owe exactly the cost of what you are buying. Conversely, with credit cards you can charge away and then when the bill comes due, you may not be able to pay it off in full; therefore accumulating interest and owing more than what you actually spent. Even with debit cards you can sometimes spend more than what you have in your account, which leads to overdraft fees; once again, causing you to pay more than what you actually spent.
Discounts
Sometimes by offering to pay in cash you can receive discounts. Credit card processing for businesses comes with a fee and oftentimes this fee is passed on to the customer. Since it is built into the cost of things, you may not even realize you’re covering a processing fee when you pay with a credit card. It is worthwhile to ask the vendor/business if you can save any money by paying in cash. Sometimes you can, sometimes you can’t, but it’s worth a try. Another place where cash offers a discount compared to credit cards is when paying for gas. Many times paying with cash or a debit card at a gas pump leads to a savings of a couple cents per gallon.
Cons
Harder to Track Where the Money Goes
Using cash makes it harder to track expenses. When you pay for things with your credit card, each expense shows up on your account and you are able to view it at any time. With cash, you have to be proactive and write down what you’ve spent your money on or be sure to keep all your receipts, so you don’t lose track.
No Rewards
Paying with cash does not provide you with any rewards. Credit cards, on the other hand, offer various rewards for spending, such as cash back or points that can be converted to gift cards, items, money towards travel and more. If you’re going to be spending money either way, it’s nice to earn something for doing it.
Inconvenient
In order to spend cash, you have to get the cash from somewhere. This means having to go to the bank or to an ATM. For some people, this may not be an inconvenience because their bank is on their way to/from work, close by or maybe they even work at a bank (the most convenient!). For others, though, this may mean finding the time and going out of their way to take out money. If you choose the ATM route, you may incur fees, which can range anywhere from $1.50 to $10. With credit cards, as long as you have your card with you, you are always ready to make purchases.
Some Vendors Do Not Accept Cash
As technology progresses further, some places are beginning to no longer accept cash as a form of payment. Plastic seems to have replaced cash as the preferred method of payment for both vendors and customers. On most airlines, for example, you can only use a credit card for making in-flight purchases.
Personally, I’m a huge fan of using credit cards to gain rewards. I have always paid my credit card off in full every month in the 10+ years that I have had credit cards. However, if the discount received for paying with cash is higher than the rewards I would receive by paying with credit card, I will choose to pay cash instead. For those who are easily tempted to spend more than they have or who have previously gotten themselves into credit card debt, I think it’s best to use a combination or possibly even only use cash and debit cards in order to help you resist the urge to spend.
