Cash or debit vs. credit

Every time we do any monetary transactions, we need to decide what would be our mode of payment. Is it a credit card or a debit card? Or you prefer hard cash? Each of them has its advantages and disadvantages so it is quite difficult to choose the winner.

Today, most people do not use cash for making transaction and instead, they use debit or credit cards. But there are certain situations where one of these three may perform better to fulfill your requirement.

Different credit cards may offer you multiple rewards or free flights. But many of us like debit cards as it helps to control spending. Apart from those two categories, many people still love the old school ways and use cash.

So, now the question is what and when should you choose credit or debit or cash?

Let’s find out.

1) Credit Cards


  1. You can track spending- After using a credit card to make any transaction, almost immediately you can see the transaction in your account statement. If you actively use the budgeting program Mint, your transactions will be automatically downloaded. This way credit card helps to track spending so that the budgeting gets easy.
  2. It’s an interest-free loan- Purchasing with a credit card means you enough time to pay it off, without any interest. It is kind of an interest-free loan. Most cards will give you between 55-62 days to pay off your balance without incurring any interest.
  3. You can build credit score– Using credit cards and making payment on-time can build a good credit score.
  4. Secured mode of payment– You may get consumer protections when you get a credit card. Different credit cards can provide you protection on travel, theft, loss, accident insurance, luggage protection, and trip cancellation insurance. You must inform the credit company within two business days of being hacked or having your card stolen.
  5. Amazing rewards – There is a lot of competition between credit card providers, so consumers can expect a lot of amazing rewards from different credit cards. The rewards may include free flights, hotel rooms, and cashback on purchases.


  1. Annual Fees – Some credit cards charge an annual fee. You must always look if you are getting similar or more benefit from the credit card or not.
  2. Late fees – Missing payment can lead to a late fee on your account. Often, the fee is around $25-$35.
  3. Charged interest – High-interest credit cards can take you deeper and deeper in debt if you don’t pay off your balance quickly. It especially happens when you exceed your bill due to debt. Too many unpaid bills may cause you trouble and to pay off those debts, you might have to take help from bill consolidation companies.

2) Debit Cards


  1. You can track spending– Similar to the credit cards, you can easily track your spending. So, you can get real-time data on your spending.    
  2. No effect on credit score– Using debit cards do not affect your credit score. So, you don’t have to worry about that.
  3. Highly accessible – The biggest advantage of a debit card is that it allows you to withdraw cash from a different location. There are 400,000 ATMs in the US, so you can anytime access your money.
  4. Zero debt – Debit card works on your bank account deposit. You can’t spend more than your deposit amount. Using a debit card you won’t go into debt.


  1. Limited protection – If somehow your debit card is lost or stolen, and you didn’t block the card immediately, the bank has no responsibility. It is your headache, you have to deal with. That means debit cards have very little protection compared to credit cards.
  2. No rewards- This is not an actual coin, but practically debit cards come with zero rewards.
  3. Buying limit – If you don’t have enough money in your checking account to cover a debit card transaction, the card will decline. The funds in your account are your buying limit.

2) Cash


  1. Get a discount – If you are going to shop at retail shops, many of them may offer you a discount when you pay cash. It is because most of the time they do this to avoid the transaction fees that they have to pay to the bank.                                                                                                                                                                                                                                                                                                                                   
  2. Zero debt – By paying through cash you can’t spend more than what you have in your wallet. So, practically you won’t go into debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
  3. Low risk – While using the cash you can’t lose more money than what you are carrying right now. But in both debit and credit cards, you may experience some sort of nasty bank fraud or credit card fraud.


  1. Zero tracking– You can’t track cash transactions properly unless you note them down every time you spend a dollar.    
  2. Zero protection– Cash can be lost or stolen from your wallet. So, there is no official protection associated with it. Once something happens with your cash, the liability responsibility is totally upon you.
  3. Zero rewards– NO rewards at all practically. Don’t expect the retailer will give you a discount along with rewards!!
  4. No effect on credit score – Naturally, cash payments do not have any record so only spending cash means you won’t have much of a credit score or any credit score at all.


Now you have all the pros and cons of a credit card, a debit card, and cash. It is up to you to use them wisely in specific situations. All three of them are important if you know where to use them.