Should You Pay in Cash to Save?
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Should You Pay in Cash to Save?

Posted on Friday, June 24th, 2011 at 8:12 am
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Learn the advantages and disadvantages of paying with cash versus credit cards. In a world dominated by cold hard plastic, it may seem that the time for cash has passed. At first glance, credit cards may appear more attractive because of their security advantages, convenience, and sleek design that slides right into your wallet or back pocket. Yet despite all this, paying in cash is a wiser budgeting and financing move. Here is why:

Cards vs. Cash

  • Security: Credit cards have an added security advantage over cash since they are protected by personal identification numbers (PINs) and signatures. If your credit card is lost or stolen, you can put a stop on the card through your bank. Unfortunately, the only security cash has is your own ability to protect it so you should take some precaution when carrying cash. Simply, don’t carry cash until you are ready to spend (this protects it from your own impulse buys too). Stop at the bank or ATM on your way to your destination and pull out the amount of cash you have budgeted for your shopping trip. Not only will this keep you from overspending or buying items that aren’t on your list, but it will also shorten the time frame for losing your cash.
  • Convenience: True, credit cards are easy and convenient. You never have to go to the ATM, you never have to worry about coming up short at check-out, and your wallet is never bursting at the seams with wads of change. However, the interest rates and accidental overspending may not be all that convenient in the long run. From my own experience, I have learned that credit cards are perhaps a little too convenient. I am more aware of my spending when I have to go through the effort of getting cash and counting it out at the register.
  • Budgeting: In the budgeting department, cash definitively comes out ahead of credit cards. In my article, “How to Create a Grocery Budget,” I discussed the advantages of using cash to maintain a grocery budget. This technique can apply to all purchases. Set your shopping budget and then get that exact amount in cash from the bank or ATM so you don’t overspend. Take a calculator with you to keep a running balance on your total as you shop (many cell phones have a calculator feature). However, if you are buying a big-ticket item, such as a car for example, you probably shouldn’t carry that amount of cash. In these cases, try to use a check or debit card so that you are still spending money you actually have. When using checks and debit cards, always know how much money you have in your account in order to avoid overdraft fees.


  • Despite the appeal and ease of credit cards, cash really can help you save money. Although it is a good idea to have a credit card for emergencies and to build credit, make sure you keep the balance low and pay it off every month. One way to do this is to only use your credit card for one thing, such as gas. You probably know about how much you spend on gas each month, so if you charge it and pay it off each month you will build credit without accumulating debt and interest rates. All too often credit cards give false confidence in spending. I can’t even count the number of times I have charged items I didn’t need, telling myself it’s okay, I’ll just charge it. Since moving my credit card to the back of my wallet and budgeting with cash instead I have saved hundreds!

Do you prefer to use cash or cards? Tell us why in the comments below!



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Good Tip: Saving money is important – especially if you have a lot of expenses like bills to pay, loans to pay off, and all the other things that drain your bank account. Figuring out a way to save money can feel tedious to some, and like a punishment to others. U.S. News suggests that you try one of these money saving challenges. The “No Eating Out for a Month” Challenge This one is self-explanatory. The goal is to avoid eating out for an entire month. This might be super easy for people who enjoy making meals at home. People who really enjoy dining out, or ordering food to be sent to their home, may struggle with this one. It’s worth a try because spending money on take-out is more expensive than buying groceries. The Pantry Challenge This one is a variation of the “No Eating Out for a Month” challenge. The goal is to use up all of your groceries before you buy more. It forces you to try and remember why you bought a food or beverage that you don’t know what to do with, and gives you the opportunity to find a way to use it. The one exemption to this challenge is the foods that have expired. Don’t eat them! Throw them in the trash. The “No Spend” Challenge Make a goal to avoid spending money during an entire weekend. The only exemption in this challenge is that you are allowed to pay bills. This challenge is interesting because it requires creativity. You must be creative and find workarounds for problems that you would typically solve by spending money. You may have a different outlook on spending after finishing this challenge.