Which Prevails - Cash or Credit Card?

I recently spent three weeks with a woman I’ve been friends with for almost 50 years. She’s the friend you can drop in for an extended visit without feeling guilty because her home feels like your home. Although we are that close, we live distinctly different lives.

• She owns a huge home in an urban city dwelling. I live in a one-bedroom apartment in a small Florida town.

• She and her husband have been married for almost thirty years. I became a widow in my late 40s. 

• She comes from a large family and as a result has countless nieces, nephews and grands, whereas I am the last living member of my immediate family.

During this last visit, I noted a distinction I’ve always been aware of but never gave much thought. My friend pays cash for most everything, while I’m a credit card girl (never leave home without one). 

This difference got me thinking about the pros and cons of cash versus credit. 

A certain amount of satisfaction is associated with making a cash purchase. No devil’s advocate is perched on your shoulder questioning how you’re going to pay the bill when it comes. The transaction is over and done.

On the other hand, my philosophy is bills are not a problem unless you can’t pay them. I find cash gets away from me. I often can’t account for how I spent the money. It’s easier for me to manage my expenses if I charge most purchases and pay one bill when the credit card balance comes due.

Studies have shown that people who pay in cash spend less than those who swipe a card. The cash method means you can’t spend what you physically don’t have and impedes impulse and convenience spending. The credit card method requires budgeting and having discipline to prioritize your financial goals.

Paying cash often presents opportunities to save money. I’m sure you’ve noticed that many vendors have passed their credit card fees on to the consumer. Gas costs $.10 more a gallon when you pay by credit. Restaurants and other service providers add another 3% plus to your bill if you choose to use a credit card.

I’m willing to eat these charges up to a certain amount. Gas and most restaurant tab add-ons are acceptable; however, I’ve had to give in to carrying more cash than in the past. One reason is I believe in cash tips. Although I’m not fond of how tip expectation has gotten out of hand (a discussion for another day) and the process waitstaff has to go through to finally get the money when a tip is placed on a credit card.

And you can talk about us folks who pay by check if you want, but I whipped out that checkbook (same as cash) in a minute to avoid paying an additional 3% for a $1,500 car repair bill. That $45 could pay for dinner at a restaurant, tip included. 😜

Credit cards also allow you to save money. This coming from someone who paid for my $500+ airline ticket for the above-mentioned trip with funds from my credit card rewards program. That the cost of this ticket was more than double the price it was last year is also a discussion for another day.

Anyway… back to the topic at hand.

Here are two more credit card pros.  Fraud and other types of disputes are easier to deal with when the suspect charges were paid by credit card rather than cash. And stolen or lost credit card issues are easily remedied.  

I can see you now - picturing an attempt to get cash back in these types of situations versus simply getting a credit or refund on your card. lol

Truth is, the choice to pay by cash or credit depends on your spending personality and the circumstances of the charge. 

My reality is I simply do not like to carry cash. Never have. I can recall times when travelling for my job that I found myself in other cities with only a couple of dollars in my wallet. I assure you, however, I now travel with both a credit card and cash. 

Let’s have a show of hands. Which works better for you – paper or plastic?