It’s the age old question asked everyday by cashiers across the country: “Cash or credit?”

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Since both payment types come with distinct advantages and drawbacks, how do you decide which method is right for you? We mapped out the pros and cons below:

Pros and Cons of Cash

Pros

  • There’s no denying the convenience of cash: although there are rare occasions where businesses won’t take cash, nearly every retailer accepts it.
  • If you only spend the cash you have, you can’t carry a balance and won’t pay interest on purchases.
  • Tangible currency can be easier to manage. Some people feel that the act of counting their money and handing it over gives them a better appreciation for their savings and makes them less likely to overspend.

Cons

  • Cash is by far the most vulnerable to theft. If you lose your wallet, there’s little chance of it being returned with the money untouched. To be safe, those who rely on using cash should deposit it in the bank and make regular withdrawals to pay for their purchases.
  • It’s harder to be prepared for an emergency. If you need to drop $500 on a last-minute plane ticket or car repair, chances are you don’t have the cash on hand to cover it.
  • Some people say they are more likely to overspend when they have cash in their wallet because it makes them “feel rich.”
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Pros and Cons of Credit

Pros

  • Using a credit card can be a more convenient method of payment than using cash. Credit card users are protected from fraudulent transactions by the Fair Credit Billing Act, which limits their fraud liability to $50. 1 Yet in practice, most card issuers waive that requirement by offering a zero dollar fraud liability policy meaning that consumers are not responsible for unauthorized purchases on the credit card account. Credit card users are even protected when a charge is authorized, but the goods or services purchased are not delivered, or what is delivered is not as described. In these cases, cardholders can file a dispute against the merchant, an option that is not available to users of cash, checks, or even debit cards.
  • Credit card users are also able to conduct transactions online and over the phone, and hotel and rental cars are much easier to reserve with a credit card than they are with cash.
  • You may earn cash rewards just by making purchases. Many cards offer travel and cash back rewards, not to mention purchase protection benefits.
  • You’re covered in an emergency. Did your fridge break? You can get a new one without having 100% of the money in the bank.
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Cons

  • Credit cards require discipline. If you don’t pay your entire statement balance in full and on time every month, you will be charged interest on your purchases. And if you miss a payment, you can incur late fees. Successfully taking advantage of the many conveniences credit cards offer requires savvy money management.

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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