Credit vs. Debit vs. Cash: The Ultimate Showdown
Summary: Every time we make a purchase, we have to decide between using a credit card, a debit card, or cash. They all have their pros and cons. Will there be a clear winner? Credit vs. debit vs. cash: the ultimate showdown.<br> Those shiny credit card offers with their promises of free flights, and cash back can be seductive. We like our debit cards because they help keep spending under control. And some die-hards still like cash because it can make some purchases cheaper. What and when should you choose when it comes to credit vs. debit vs. cash?<br> What’s Popular?<br> Among our three choices, which do Americans<a href="https://www.creditcards.com/credit-card-news/payment-method-statistics-1276.php"> prefer?</a><br> In a 2016 survey, payment processor TSYS asked over 1,000 consumers which payment form they prefer. Forty percent chose credit cards, while 35 percent selected debit cards, and only 11 percent specified a preference for using cash.1 Consumers’ preference for credit cards increased by 5 percent over the same survey’s results from 2015, while the results for debit cards fell by 6 percent.<br><br> The survey also found that debit cards were the preferred method of payment for smaller, everyday transactions at supermarkets, gas stations and convenience stores, while credit was the choice for more expensive purchases, including those at department stores and restaurants, and for travel reservations.<br> Cash is definitely not king anymore.<br> Credit Cards<br> Americans love their credit cards. The average American has <a href="https://www.creditcards.com/credit-card-news/payment-method-statistics-1276.php">2.69</a> in their wallets.<br> <br> Pros<br> These are good arguments for whipping out the credit card.<br> Track Spending<br> When you charge something on a credit card, you can almost instantly see the transaction in your account. If you use a budgeting program like <a href="https://www.listenmoneymatters.com/go/mint/">Mint,</a> the transactions are automatically downloaded. This makes tracking your spending and budgeting easy.<br> It’s a Loan<br> Charging a purchase to a credit card is like having an interest free loan. Most cards offer between 55-62 days before interest charges start accruing.<br> If you’ve had to make a big purchase on a credit card because you didn’t have cash, you have that amount of time to pay it off before you have to start paying interest. This allows you to spread out the cost of a big purchase over time.<br> They Help You Score<br> We’ve talked about the importance of having a good <a href="https://www.listenmoneymatters.com/highest-credit-score/">credit score</a> and using credit cards can help build your score.<br> You’re Protected<br> You have some consumer protections when you purchase a credit card. Protections vary by card but some things typically covered include replacing a stolen or damaged item, refunds for a product or service you are unhappy with, and extended warranties.<br> If you <a href="https://www.listenmoneymatters.com/travelers-rights/">travel,</a> credit cards can offer things like travel accident insurance, luggage protection, and trip cancellation insurance.<br> If your card is <a href="https://www.listenmoneymatters.com/improve-online-security/">hacked or stolen,</a> it’s the credit company’s loss and not yours. As long as you notify the company within two business days of being hacked or having your card stolen, the maximum you are responsible for is $50.<br> If you wait more than two days but less than 60 after your statement is sent, the maximum is $500. I’ve had my card hacked though, and the company let me off the hook for the entire amount.<br> It’s Not Ideal<br> A credit card is not meant to be used as an <a href="https://www.listenmoneymatters.com/importance-emergency-fund/">emergency fund;</a> you need cash set aside somewhere easily accessible like a checking or savings account.
