Plastic or Paper – Which is Better Credit Card or Paper money

Posted on January 20, 2012 by Max

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It’s possible to make compelling arguments for using both cash and credit cards.  With fees on the rise for every type of plastic, from credit to debit to prepaid debit, many people are coming back to old-fashion paper money to make sure that they avoid the fee-for-all.  That said, the rewards and security of credit cards means that putting them down in favor of cash might not be the best idea.

So what’s best overall, paper money or plastic – Credit Card?  Let’s compare.

1. Cash makes it easy to avoid fees.  Sure, you could get hit with an ATM fee when you make a withdrawal.  However, this problem is easily solved by visiting the teller to get your cash or by doing a little research and finding a fee-free ATM.  Avoid the ATM tariffs and cash is completely fee-free.  This trait gives green money a distinct advantage over credit, where fees are all-but-inevitable despite your best efforts.  At the very least, plastic-users have to worry about payment deadlines, credit limits and avoiding interest payments and other penalties. 

Advantage: cash.

2. Credit cards can, however, be used to earn valuable rewards.  Rewards cards, if used correctly, can earn you free items, free services, or even cash back bonuses.  Yes, keeping track of monthly payment deadlines and making sure to avoid interest rates (so that you can get full value out of your rewards) takes a bit of effort, but it could be worth it.  No such rewards are tied in with using cash.  So, though cash-users don’t have the worries of managing a credit card account, they also don’t have the rewards. 

Advantage: credit.

3. When it comes to budgeting, both forms of currency have their pluses.  Cash is easy to budget because you can physically see it and physically divide it to make sure that you have enough to cover your expenses each month.  Having trouble sticking to a budget?  You can simply take out the cash that you have to use for the week or month and, when it’s gone, that’s it ’til next month.  Credit does not have the same physical budgeting traits that cash has, but most credit card companies make it very easy to manage your account online or even via your phone.  Also, third party sites like Mint.com make it simple and convenient to manage multiple credit card accounts.  Mint can remind you about payment deadlines and other important things that affect your credit card management. 

Advantage: both.

4. Credit cards have security features that make them quite safe to use.  Sure, fraud is out there, but, for most physical thefts, skimming scams or other types of credit card fraud, users are only liable for fraudulent charges up to $50. Companies can handle the fraud and cancel a card so that the thief cannot use it.  Cash enjoys no such protections.  If it’s stolen, it is, more or less, gone, unless the police catch the thief with the money in his pocket (unlikely).

Advantage: credit.

5. Cash is infinitely more versatile than credit.  Yes, you have to carry it around, but what about all those places where credit is not an option (street vendors and farmers markets, for example) and what about times when cash is infinitely easier to use (in bars or coffee shops or anywhere else crowded and chaotic).  Though cards are accepted at most places, if you are traveling, you’ll have to worry about acceptance of your brand of card and you’ll also have to worry about foreign transaction fees if you leave the country. 

Advantage cash.

The result: cash can make it easier to budget and easier to control your spending and avoid fees.  But going completely credit-less means missing some major perks.  Perhaps the answer for most people is to be more cash-oriented, but still rely on credit when it is convenient to do so.

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