Cash: pros
Cash has some advantages over credit cards. Here are three:
- Easy budgeting
- Universally accepted
- Deals at small businesses and gas stations
Cash is easy to budget. You can't spend more than you have. Want to limit your spending to $30 at the grocery store? Stick $30 into your wallet and leave the rest at home. A plethora of low-tech budgeting techniques rely on cash, like the envelope method. According to the financial gurus who plug them, they're effective at getting you to save more money.
Cash is widely accepted in the United States. This is important because some small businesses only accept cash. It's also an easy way to tip at restaurants, so there's the convenience factor. If you're traveling somewhere new, it might be handy to carry around $50 in case a cool shop refuses your Discover card or Apple Pay.
Cash gets you deals at some small businesses and gas stations. Some businesses offer you discounts for using cash because you're saving them money -- they don't need to pay credit card processing fees to card networks like Mastercard or Visa.
Cash: cons
Cash falls short of credit cards in some ways. Here are three:
- Hard to track
- Limited withdrawal options
- Expensive ATM withdrawal fees
Cash is hard to track. Ever stuck a $20 bill in your pants pocket, only for it to mysteriously disappear 30 minutes later? It happens. Cash can be stolen and misplaced. It's an unfortunate reality that overshadows the occasional discovery of a crumpled $5 bill in the laundry machine. And if you lose cash, the U.S. government probably isn't going to help you recover it.
Cash has limited withdrawal options. Need to stock up? Unless you've got all your money stored in a safe back home, you're going to need to withdraw cash from a bank account. To do so, you'll need either an ATM or a bank branch in your area. Otherwise, you're out of luck.
Cash can be expensive to withdraw from ATMs. If you withdraw from out-of-network ATMs, you may be charged a withdrawal fee. When you withdraw small amounts frequently, these fees add up. Fees typically range from $2.50 to $5, according to Value Penguin.
Credit card: pros
Credit cards have some advantages over cash. Here are three:
- Convenient
- Highly secure
- Rewarding when used properly
Credit cards are convenient. Many places accept them. You can use credit cards, especially Visa and Mastercard, abroad at many places that don't accept U.S. dollars. Some businesses, including hotel and rental car agencies, only accept credit cards. If you're in a pinch, you can use a credit card to pay for something you couldn't otherwise afford to pay for in cash. These all make credit cards extremely convenient to use.
Credit cards are highly secure. If someone steals your card and swipes it, you can report it so that you pay no more than $50. In many cases, card issuers will refund 100% of fraudulent payments. Furthermore, card issuers often secure your credit cards even more by freezing disputed payments, sending you fraud alert notifications, and so on.
Credit cards reward you for swiping responsibly. Some cards literally pay you cash back rewards for swiping at checkout. Others earn you travel points you can put toward booking flights and hotel stays. Most importantly, using a credit card the right way builds your credit score. An excellent credit score can save you tens of thousands of dollars on loans for car payments and mortgages.