A restaurant server hands couple a portable card reader with credit card

What Are the Pros of Credit Cards vs. Cash?

7 min read

Last Updated: February 7, 2025

Table of contents

Key Takeaways

Paying with paper money can encourage mindful spending and budgeting habits, but cash lacks the convenience of credit cards, like making purchases online.
Credit cards have greater security than cash and may give cash back rewards.
Interest charges can stack up if you don't pay off your credit card balance each month, and there might be fees for late payments.

There's a lot to consider when comparing the benefits of using a credit card to the benefits of paying with cash. Each payment type has advantages and disadvantages, so you'll need to weigh your options to decide what's right for you.

Credit Card	vs	Cash
Can be used for online purchases and booking travel accommodations.		Physical cash may not be accepted at certain businesses and can only be used in person.
Most earn rewards, like cash back or travel perks.		No rewards.
Typically safer than carrying cash, and offers protection from unauthorized purchases if lost or stolen.		No built-in fraud protection. If cash is lost or stolen, it's hard to recover.
Available for emergency or unplanned expenses.		You can only cover the expense if you have the cash available.
Using a credit card can help you build credit.		Doesn't build your credit, which may limit access to credit in the future.
Helps to budget and track expenses by providing a detailed spending record.		Can go unrecorded and lead to missed expenses when budgeting and planning.

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The pros and cons of credit cards

In an increasingly digital landscape, a credit card can be a more versatile and reliable form of payment, but there are also drawbacks to credit card spending.

Pros:

Fraud protection. Credit cards provide security. If you lose paper money, chances are it's gone for good. But credit cards have you covered in a few ways. You can cancel a lost or stolen credit card, and thanks to the Fair Credit Billing Act, you're protected from fraudulent charges (anything over $50), according to the Federal Trade Commission.

Did you know?

Your credit card company may even provide additional fraud protection. Discover offers a $0 Fraud Liability Guarantee. You’re never responsible for unauthorized purchases on your Discover Card.¹

Rewards credit card benefits. Credit card issuers may offer cards with cash back rewards, which is an advantage over both cash and debit cards. You spend; you get a reward. It's that easy. For example, with the Discover it^® Cash Back Credit Card you can earn 5% cash back on everyday purchases at different places you shop each quarter, up to the quarterly maximum when you activate.

Travel perks. Booking travel expenses, like hotels and flights, with a credit card isn’t just convenient. With a travel credit card, you may be able to use your rewards to make travel purchases more affordable. Plus, some travel credit cards offer other perks, like flight upgrades or free hotel stays. You may have to pay a fee for using a debit card abroad. But some travel credit cards may not charge foreign transaction fees.

A credit card payment can help cover surprise costs. Credit cards can help you pay for emergency expenses you may not have the cash in your bank account to cover, from costly repairs to unexpected medical bills.

No interest charge if you pay on time and in full. When you carry a balance on a credit card, you typically owe an interest charge (a monthly percentage charged on the amount you borrow from your credit card issuer). However, you can avoid interest by paying your credit card bill in full each month. This can also help you keep your credit utilization to a minimum.

Cash advance. If you absolutely need cash for an expense, a credit card may still be the solution. Some credit cards offer a cash advance you can use for any expense. It’s easy to access cash with your Discover^® Card.

Build good credit history. Using a credit card can help you build credit history. If you use your credit card responsibly, keep your credit utilization low, and pay your credit card bill on time, you can improve your credit score, which can help you qualify for better terms on a personal loan or other form of credit in the future. If you’re just starting to build credit, a secured credit card or student credit card may be a good fit.

Online banking tools. Many credit card companies offer online banking and mobile banking options for managing your credit card account. Online and mobile banking makes it easier to track expenses, pay your bills, view your rewards, and pay down your credit card balance, making this a valuable personal finance tool.

Cons:

Interest charges. Credit cards require discipline. If you spend more than you can afford to pay back each month, you can accumulate interest. When interest on a purchase adds up, the expense can increase well beyond the original purchase price.

Annual Fee. Among major credit card issuers, some credit cards come with an annual fee. Discover has no annual fee on every credit card.

Missed payment fees. If you lose track of the payment due date on your credit card bill, you may miss a payment and incur late fees. Each late payment may appear on your credit report and hurt your credit score.

Credit card debt. It may be easy to overspend when using a credit card. Overcharging or maxing out your credit limit could lead to unmanageable credit card debt, a bad credit score, and other financial problems.

The pros and cons of cash

Credit cards are popular in today's modern world. And while there are advantages to paying with plastic, there are also benefits to making purchases with physical cash in hand. Here are some of the pros and cons:

Pros:

No interest charges. There are no additional charges when you pay with cash. If you don't pay off a credit card balance in full by its due date, you'll pay interest. You can avoid interest by paying with cash and save a little money.

Promotes careful spending. Swiping a credit card (or even a debit card) is easy. But withdrawing and handling physical cash can make you more aware of your spending and how much is in your checking account or savings account.

Some people may feel that counting and handling money makes them appreciate their savings more and be less likely to overspend.

Makes it easier to follow a budget. Cash can help you to stick to a budget. If you resolve to spend a fixed amount per week, it may be easier to stay within your limit by withdrawing that amount in cash and only paying with it.

Cons:

Less Secure. Cash is less secure than a credit card. Unlike credit cards, if you lose physical money or have it stolen, it may be difficult to recover your losses.

Less Convenient. You can't always use cash as a payment method. Credit cards offer conveniences that cash just can't, such as making purchases online and booking flights, hotels, and rental cars.

Your cash savings may not cover certain expenses. You may not have enough cash to cover unexpected costs. Life is unpredictable, and so are certain expenses. If something comes up, like a surprise trip to the doctor's office, the cash in your pocket might not cover that co-pay.

Know the advantages of credit card use vs. cash

Understanding the advantages of credit cards and cash can strengthen your financial health and weighing the cons can help you decide which is best to use. The ideal payment method ultimately depends on your individual needs and personal preferences.

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