Are Credit Cards Better Than Cash?

Are credit cards better than cash? Credit cards can be more convenient than cash, but are they a better way to spend money? The answer, as is almost always the case, is “it depends.” However, it’s worth looking at some of the benefits of credit cards that you might not have thought of.

3 Ways Credit Cards Are Better Than Cash

There are a number of benefits offered by credit card issuers that can make using cards better than paying cash. These include:

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  • Rewards: This is the biggie. When you use your rewards credit card, you may earn rewards on purchases. If you use a rewards card intelligently, especially if you earn rewards in certain categories, you might find it well worth it to use a credit card. Cashing in the rewards you’ve earned can either help pay down your outstanding debt or let you get yourself something just for fun.
  • Building Credit: Credit cards are one way to building your credit history throughout your life. You might not care about having credit cards, but you probably care about your credit score. The strength of your credit score can be important for renting apartments, getting car loans, buying a house or even landing your dream job.
  • Cardholder Benefits: Check out the other benefits of your card. You may get an extended warranty on items purchased with a credit card that you won’t have when you purchase the same item with cash, or the card my help with benefits such as price protection. That can bring added peace of mind, especially when purchasing big ticket items.

How to Responsibly Use a Credit Card Instead of Cash

If you’re going to use a credit card in lieu of cash, you need to do so responsibly. A credit card is not better than cash if you’re racking up interest charges and other fees.

  • Do the Math: On any card with an annual fee, you need to look at whether or not you’re going to be getting enough in benefits to justify the cost. How much do you realistically spend? How much are the potential rewards worth to you?
  • Pay off Your Balance Every Month: Don’t allow interest to accumulate on your credit cards. Pay the full balance on time every month. For example, many people get credit cards offering bonus points on groceries and gas. They use this credit card whenever they buy groceries and gas to earn rewards. However, this really only works in your favor if you pay off the balance each month. Otherwise, you’ll be paying interest on the purchases and negating what rewards were earned.
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Credit cards certainly can be better than cash, provided that you use them smartly and responsibly. When you can do that, you can enjoy all of the benefits without the interest charges and revolving debt that can come along with them.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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