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Cash vs Credit: Which Should You Carry?

To generate money, one must know how to spend money. Among the most common forms of spending in the 21st century includes cash and credit cards. Both come with unique advantages and disadvantages, but that doesn't necessarily mean one mode is more dominant than the other. It is true that the plastic card is slowly replacing the greenback in many areas of consumer culture. But how could something as old as history of civilization itself suddenly fall to a recent innovation?
Although this may raise many concerns about the future of currency in America's rapidly developing economy, it is safe to say that both cash and credit are here to stay for several generations. It seems that many people still need greenbacks along with the potent plastic card after all. Therefore, the choice between the two options essentially comes down to how one would define convenience.

A Buck-et of Awesome

One should not underestimate the power of cash. Why else would it date as far back as the birth of the Roman Civilization? The legal tender has perks that the plastic card could only dream of, namely its invisibility in all transactions. 
No personal information or details trail along a Benjamin when used, keeping anonymity alive in all forms of transactions. Without question, the only verifiable source of all the money is the Federal Reserve Board. This keeps any kind of payments for goods and services anonymous to the bigger watchdogs from agencies to regulatory bodies to companies that might have otherwise keep a detailed record on a person's transactions. Likewise, there is no expected repayment to any agency because no money has been borrowed from it to begin with. 
Just as transaction fees usually don't exist for this option, it helps one to limit spending. Indiscriminate spending is possible with the card, but paper money has finite value—always. Many local shoppers, traditional consumers, and frugal people would attest that placing spending limits helps entail a desire to spend less and save more, an important skill to cultivate financial responsibility.

What the Buck?

But the tender has its limits. It is easily forgeable, which can spell trouble if counterfeit money ends up in one's hands. Such currency may take up a tiny fraction of the economy, but its presence gives the impression that cash is unreliable. The invisible aspect is also problematic because paper currency offers no purchase protections. For instance, if Ashley bought a bag of Hot Cheetos but someone stole it from her before she opened the bag, she cannot claim myself as the true owner of the bag because no record is present to prove it.
For obvious reasons, a person cannot use paper currency to shop online. E-commerce thrives on electronic payments, so the greenback in this sphere has relatively little value. Worst of all, the buck cannot help with large payments. It's impossible. Unless one owns a large vault at home with hundreds of thousands of dollars worth of Benjamins, he or she cannot expect to buy a new house or car out of his or her own pocket.

A New Era of Consumerism

Ever since the concept was introduced in a late 19th century utopian novel by Edward Bellamy, the credit card set out to remedy the problems prevalent in hard and cold currency. One solution was convenience, unmatched in that it not only delays payment but also packs a lot of potential spending power in something so small. The card also helped launch many businesses and online startups that could not have formed otherwise. It encourages consumers to spend, thus improving the economy while giving the consumer what he wants whenever he wants.
Online shoppers benefit from a wide variety of selections without having to budge an inch, and so do online vendors. All electronic payments are done securely and, unlike the greenback, the card guarantee purchase protection. Plastic is also useful in case of emergencies, as there can be times when paper money alone is not enough to cover a cost.
Finally, wonderful benefits like gas mileage, rewards, cash back and more are available for plastic. This feature allows responsible spenders to reap the fruits of their labors, like improving credit score. A good or better score can qualify a cardholder to apply for mortgage and other similarly large payments.

A Plastic Compromise

Unfortunately, with the credit card, agencies can monitor spending habits, as with every transaction made, a record is left behind. Fraud can also happen and ruin credit scores with a blink of an eye. 
Irresponsible spenders can face punishment in the form of high interest rates. For example, suppose that a guy named Joe had a savings account with $1000 already deposited and he gain an interest of 2% a year. He would gain $20 dollars more by the end of the year. But if the guy had a debt of $1000, forgot to pay the balance, and accrued an interest rate of 19%, he owes the bank $190! Paying interest definitely hurts.
Another major problem is that it can increase spending. In the VoucherCloud survey, 84% of respondents claimed that spending with plastic wrought more damage than their paper counterparts. Convenience can surely backfire when it comes to thinking twice before making a purchase.

What to Choose?

Again, the choice largely depends on the individual's preferences. Many experts suggest that people opt for solely cash-based payments to limit spending, but both modes have their uses depending on the type of payment. However, if using plastic leads to a massive debt that's hard to escape from, then opting for the paper currency is a better idea. When it comes to spending more shrewdly, a little bit of planning on daily expenses can go a long way.

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Alice Bryant's picture

Alice Bryant is the Editor of Creditnet and a personal finance expert with over a decade of experience writing about credit cards, credit scores, debt repair, and more.

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