Cash vs. Credit: What Is Better For Frugal Living?

cash versus credit card

If you start asking people their attitude to cash and credit cards, you will find there some strong and clear opinions about it. And this is normal because each of the options has certain pros and cons. And the choice in favor of one or the other is a personal matter for everyone. In this article, you will find several advantages and disadvantages of cash and credit cards, that will help us understand which option is best for frugal living. 

Credit Cards 

A credit card is an attribute of a modern person and each of us has at least one card in the wallet. This is probable except for those who choose cash at the end of all and are trying to stay off the grid.

Here are a few advantages of using a credit card: 

Hygiene:  Hygienic consideration is one no one really thinks about. It's no secret that money is one of the dirtiest things in the world. It's not surprising since they go through hundreds of people every day. They can drop, sneeze on them, and you'll never know how often a person who owned this twenty before you washes his hands. Bills are also infamous for going through countless seedy, unsanitary, and even illegal locations. While the credit card touched by a limited number of people and you can always wipe it with an antibacterial napkin. The credit card clearly wins this battle. 

Convenience In An Unusual Situation:  Sometimes it happens that something unexpected happens, and you urgently need money to fix it. In this case, the credit card will be on hand. You can repair the car, buy textbooks for a semester, and pay off later. Just like with online installment credit option which can be offered by certain companies, it is very convenient when you make a big purchase and you have an opportunity to pay it back for several months. 

Cashback And Discounts:  Often banks make promotions for cardholders, for example, each time you pay for purchase or services with the card, 1-5% will be returned on your account. Also, some big shops can offer a discount for purchases paid by their card. Well, who doesn't like discounts? 

Build Up Credit:  In today's day and age you need to make purchases on credit cards and make consistent payments to develop a credit rating. Without a credit rating it will be difficult or impossible to get a bank loan, car loan, mortage, or other financial necessity and it can even affect your job prospects from potential employers!

These are some disadvantages of credit cards: 

Lack Of Cash Flow.  When you spend money that is on the card, they seem pretty virtual. The sensation of spending money or saving them almost disappears when you use a card. It can lead to losing control over the financial situation and to debts. If using a credit card, you need to control yourself and understand that even if you do not hold this money and cannot count it, it is still real. 

Interest And Fees.  Even if you control your bank account and pay the monthly payment in time, you are still not insured against interest and fees. You can simply make a mistake, forget that you have already spent your monthly maximum or skip the payment day. For less organized people, this happens almost every month and they get used to returning more than what was spent. Even small mistakes can cause a loss of hundreds of dollars each month. This can more than cancel out any of the cashback rewards or other perks of using a credit card, and for a large percentage of people it does.


Cash is not just an old-school approach to finances but also a way to keep control over your money and live without debts. They say that "cash is king" and to a certain extent that old phrase rings true.

These are some pros of using cash only: 

The Physical Sense Of Money.  Scientists have proved that when we pay for something in cash, this feeling is similar to the physical pain. When we hold, recalculate and give away some of our money, we feel a loss. This makes people make a more conscious choice when shopping. Instead of taking few things without actually thinking a lot and paying it with a credit card. So, cash helps to spend less. 

With Cash, It Is Impossible To Spend More Than You Have.  It's just physically impossible, unless you get into a real bind and have to verbally commit to paying more cash at a later date. While the credit card creates a sense of unlimited possibilities, for which you will need to pay a pretty high price. 

You Do Not Need To Worry About Bills.  Many regular credit card users live in fear of the day when the monthly bill comes. In the modern world, it is hard to stay emotionally stable with all this stress we are facing every day. But the fear of bills or the fact that again there is not enough money to pay debts puts the person in a low situation. 

Discounts.  For some purchases you'll actually get a lower price if you decide to pay cash over credit cards. This could be due to the business receiving the cash not having to pay credit card processing fees, and transferring those savings to the consumer. Or it could be the recipient of the cash will accept less cash for a payment because they can keep the transaction under the table and avoid taxes (illegal and not advisable obviously).

The disadvantages of cash are: 

It Is Difficult To Be Ready For Unexpected Expenses.  You might make savings, but some situations can be easily solved only by a credit card. For example, if you are late for a plane and you need to urgently buy a ticket for the next flight and there is not enough cash since you didn't expect this to happen. A credit card would be really helpful in such situation. 

If You Lost Money, Forget About It.  In fact, if you lose your wallet with cards, you can always block them and get new ones. More likely your balance will be untouched and your money will still be there due to security measures. However, if the wallet is stuffed with cash and you lose it (or it gets stolen), even if you will see it again it will definitely be empty. In such cases, you understand the safety of credit cards the guys in the bank was talking about. 

Cash Versus Credit: Which Is King?

As you can see, cash and credit cards have their pros and cons. However, it is for the frugal living the cash is always better. It gives money more value and helps to manage it wisely. After all, what can be more modest, simple and logical than just living on your own money?

I hope you enjoyed this article about the pros and cons of cash versus credit for payment options.

Interested in more articles about frugal finance?

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