Is it better to use credit card or cash?
In general, NerdWallet recommends paying with a credit card whenever possible: Credit cards are safer to carry than cash and offer stronger fraud protections than debit.
Most people are willing to spend more on their plastic than in cash. Paying cash also avoids the interest charges on credit cards. If you can't pay your statement balance in full each cycle, you'll accrue interest charges. Some downsides to cash include the risk of loss, theft, and hygiene.
Good credit is important because it can help determine whether you're eligible to borrow money and access many essential needs in life, such as reliable transportation and affordable housing. Credit also plays a role in how much you pay for financing when you apply for loans, credit cards and more.
Many of us use credit cards irresponsibly and end up in debt. However, contrary to popular belief, if you can use the plastic responsibly, you're actually much better off paying with a credit card than with a debit card and keeping cash transactions to a minimum.
While debit cards and cash offer consumers limited benefits, using a credit card can help protect you against purchases that go awry. A credit card is guarded from fraudulent activity and some offer benefits like travel insurance and return protection.
Paying with cash keeps you from spending money you don't have—which means you don't owe anyone. And unlike credit, when you buy those new shoes with cash, you don't have to worry about making payments on them or the interest coming back to bite you.
Opting to primarily use cash for your purchases can lessen your reliance on credit cards and accruing more debt. Cash is a powerful tool for financial accountability because it creates a higher feeling of shopper's remorse, which encourages more discipline when it comes to spending.
Cash transactions are fee-free. Privacy: Cash transactions are generally more private, and some people prefer not to leave a digital trail of their purchases or sales. Immediate Access: Cash provides immediate access to funds without waiting for bank transfers or processing times associated with digital payments.
And while using a credit card for bigger purchases can make sense if you're worried about carrying a large amount of cash around, most people tend to spend more than they would if they were paying cash on everyday purchases. Consumers will spend 83% more on credit cards than they do with cash.
If you have one or more credit cards you rarely or infrequently use, there likely won't be a penalty fee or immediate ding to your credit score. However, a card issuer may choose to deactivate an inactive account eventually and in such a case, your credit score could take a hit.
Is it smart to use your credit card for everything?
In general, NerdWallet recommends paying with a credit card whenever possible: Credit cards are safer to carry than cash and offer stronger fraud protections than debit. You can earn significant rewards without changing your spending habits. It's easier to track your spending.
Similarly, if you pay off a credit card debt and close the account entirely, your scores could drop. This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio.
You Won't Build up a Credit History
People who use credit cards and pay them off in good time will establish a pattern of borrowing and therefore can build up a good credit score. By going cash only, you do not have the opportunity to build up a credit history, which may limit your access to credit when you need it.
Canceling a credit card will cause a direct hit to your credit score, so more often than not, you'll want to keep the account open. Correctly managing an open, rarely-used account may require some extra attention, but the added effort will help your credit in the long run.
Both debit and credit cards are also safer methods than cash when it comes to health protections, as they don't have to pass from your hand to another person's or need to be inserted into a terminal. Tap to pay is a contactless way to use your debit or credit card that's even faster than dipping or swiping it.
Advantages of using credit cards
Security: Carrying a wad of cash is rarely a good idea, especially when you're away from home and distracted to the max. If your wallet is lost or stolen, any cash is probably gone forever.
After testing the front and back of 41 different debit and credit cards, 27 different bills, and 12 different coins, and calculating the average germ scores for each payment based on the results, debit and credit cards turned out to be the dirtiest payment method.
It's not for everyone to live cash free. Some lifestyles simply cannot accommodate it, depending on your necessities. , While possible with cash, paying for utilities, electric and gas bills is also much more difficult without payment apps, credit or debit cards or a synced bank account.
No matter how you answer, there could be an impact on your credit limit, Howard said. Lenders can cut your credit line at any time whether or not you respond to update requests.
Roughly 69% of Gen Zers say they're using cash more now compared to a year ago and 30% are using the “cash stuffing” technique to manage their money, according to a May report from credit reporting company Credit Karma.
Is Gen Z using cash?
Gen Z is embracing cash, despite digital money being the primary way of spending, saving and investing in 21st century life. A 2023 study by HarrisPoll on behalf of CreditKarma found that 69 percent of Gen Zers in the U.S. and U.K. were using cash more than they did in 2022.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
As people move toward more electronic or digital forms of payment, it might seem like paper money is on its way toward obsolescence. But experts say that cash will always be around.
Cash offers no protection from loss, theft or fraud that you are afforded with credit and debit cards. You may also miss out on potential warranties and purchase protection if you use cash to make an expensive purchase, McBride says.
Will cash be phased out? While it's clear that cash usage is declining, it's unlikely that cash will be phased out anytime in the near future, even in economically developed countries. Cash still serves a purpose for a huge amount of the world, and offers a reliable alternative payment method to digital.
References
- https://www.cnbc.com/select/cash-debit-or-credit-for-everyday-purchases/
- https://wise.com/us/blog/should-i-exchange-money-before-i-travel-to-europe
- https://www.investopedia.com/articles/personal-finance/022415/worst-place-exchange-currency.asp
- https://www.quora.com/What-is-the-recommended-amount-of-cash-to-carry-on-a-trip-to-Europe-excluding-flight-tickets
- https://www.currencytransfer.com/blog/expert-analysis/will-cash-die-out
- https://www.trip.com/guide/info/trip-to-italy-cost.html
- https://www.worldpackers.com/articles/average-cost-trip-to-europe
- https://www.schengenvisas.com/how-much-does-a-week-in-france-cost-as-a-tourist/
- https://www.wsj.com/articles/credit-card-salary-income-money-112c089a
- https://www.ecb.europa.eu/press/blog/date/2023/html/ecb.blog230206~1ea270a762.en.html
- https://www.quora.com/How-much-Euro-do-I-need-with-me-to-spend-10-days-travelling-in-Italy
- https://www.marketplace.org/2023/04/21/what-would-happen-if-paper-money-became-obsolete/
- https://suitsmecard.com/blog/pros-and-cons-of-a-cash-only-lifestyle
- https://www.nerdwallet.com/article/banking/where-to-exchange-currency-without-paying-huge-fees
- https://wise.com/us/blog/how-much-cash-to-bring-to-europe
- https://efirstbankblog.com/4-ways-a-cash-only-budget-can-transform-your-spending-habits/
- https://www.investopedia.com/articles/pf/10/credit-card-debit-card.asp
- https://worldpopulationreview.com/country-rankings/apple-pay-supported-countries
- https://lendedu.com/blog/dirty-money-credit-cards/
- https://www.quora.com/How-possible-is-it-to-tour-Europe-on-100-day
- https://www.ricksteves.com/travel-tips/money/cash-tips
- https://www.thecurrencyshop.com.au/guides/europe/best-cards-to-use-in-europe
- https://www.ramseysolutions.com/debt/cash-vs-credit-card
- https://www.investopedia.com/articles/personal-finance/102314/cash-or-credit-better-european-trips.asp
- https://www.usatoday.com/money/blueprint/credit-score/why-is-credit-important/
- https://www.nerdwallet.com/article/credit-cards/use-credit-card-or-cash-on-vacation
- https://www.statista.com/statistics/1116580/payment-card-scheme-market-share-in-europe-by-country/
- https://www.cnbc.com/select/why-paying-with-credit-card-safer-than-debit-cash/
- https://n26.com/en-eu/blog/banking-basics-atm-fees
- https://www.euronews.com/travel/2022/07/29/post-brexit-rule-requires-brits-visiting-spain-to-have-100-spending-money-per-day
- https://finance.yahoo.com/news/much-cash-bring-vacation-230100788.html
- https://www.nerdwallet.com/article/credit-cards/why-every-purchase-should-be-on-a-credit-card
- https://www.ricksteves.com/travel-tips/money/travel-checklist-money
- https://www.forbes.com/advisor/credit-cards/what-happens-if-you-dont-use-your-credit-card/
- https://www.ricksteves.com/travel-tips/money/pay-credit-cards-vs-cash
- https://www.rmbank.com/personal-insights/cash-credit-best-time
- https://finance.yahoo.com/news/nostalgic-generation-bringing-cash-back-180000584.html
- https://www.exiap.com/currency-exchange/buy-euros
- https://www.fodors.com/community/europe/how-much-cash-needed-for-italy-599768/
- https://www.quora.com/What-is-the-average-cost-of-food-per-day-for-a-couple-traveling-in-Europe
- https://www.wsfsbank.com/resources/the-benefits-of-bringing-cash-when-traveling-internationally/
- https://www.quora.com/What-are-the-etiquette-rules-for-paying-with-cash-and-tipping-in-Europe
- https://www.thebalancemoney.com/8-simple-rules-for-using-your-debit-card-in-europe-4167622
- https://wallethub.com/answers/cc/is-visa-or-mastercard-better-for-international-travel-2140831950/
- https://shiftprocessing.com/cash-vs-credit-card-spending-statistics/
- https://www.ricksteves.com/travel-tips/money/tipping-in-europe
- https://www.quora.com/Should-you-buy-euros-in-America-to-travel-to-Europe
- https://www.quora.com/Is-1200-euro-enough-for-a-10-day-trip-to-Spain-That-s-just-for-pocket-expenses-excluding-hotels-meals-and-transportation
- https://www.moneyland.ch/en/cash-pros-and-cons
- https://www.quora.com/How-much-would-an-average-person-spend-on-a-week-long-vacation-in-Europe
- https://en.komoju.com/blog/payment-method/europe/
- https://www.unfcu.org/financial-wellness/50-30-20-rule/
- https://www.fodors.com/news/how-do-you-safe-3636
- https://www.holidayextras.com/travel-money/best-time-to-exchange-travel-money.html
- https://www.quora.com/Why-do-people-prefer-cash
- https://www.neamb.com/travel-and-vacations/the-best-ways-to-pay-when-youre-abroad
- https://www.quora.com/Why-do-people-use-credit-cards-instead-of-cash
- https://finance.yahoo.com/news/live-only-cash-120103087.html
- https://www.cnbc.com/2019/08/15/2-occasions-when-its-important-not-to-use-cash.html
- https://www.expatica.com/global/finance/banking/credit-cards-in-europe-105355/
- https://www.quora.com/Do-I-need-to-carry-any-cash-traveling-in-Europe-or-is-a-credit-card-enough
- https://www.quora.com/What-types-of-credit-and-debit-cards-are-accepted-widely-in-Europe
- https://www.forbes.com/advisor/in/credit-card/best-credit-card-for-international-travel/
- https://www.equifax.com/personal/education/credit/score/articles/-/learn/why-credit-scores-may-drop-after-paying-off-debt/
- https://www.smoney.com.au/blog/how-much-spending-money-to-take-to-europe-for-1-2-or-4-weeks/
- https://www.northwestern.edu/abroad/money-matters/money-management/accessing-money-abroad.html
- https://www.thestreet.com/personal-finance/europe-under-100-a-day-is-it-possible-13522864
- https://www.bankrate.com/finance/credit-cards/should-you-cancel-an-unused-credit-card/
- https://triptile.com/european-trip-calculator
- https://www.quora.com/What-is-the-recommended-amount-of-money-to-bring-when-travelling-through-Europe-Is-it-better-to-use-a-debit-card-or-bring-cash
- https://www.newsweek.com/gen-z-cash-stuffing-trend-tiktok-1872770
- https://www.eurochange.co.uk/travel/tips/euros-vs-credit-cards-which-is-better
- https://www.tripadvisor.com.au/ShowTopic-g187147-i14-k3645205-200_Euros_per_day-Paris_Ile_de_France.html
- https://www.citizensbank.com/learning/when-to-use-cash-credit-debit.aspx
- https://www.koho.ca/learn/how-much-cash-should-i-carry-when-travelling-abroad/
- https://www.moneysavingexpert.com/credit-cards/travel-credit-cards/