Credit vs. Cash: Why Credit is the Winner

It’s time to dispel the myth that cash is king. In reality, credit is much better than cash. You probably use a mix of cash and credit to finance your everyday expenses. But what if you had to choose one or the other? Which would be the better option? There are advantages and disadvantages to both options. This blog post will explore the advantages and disadvantages of credit cards to help you make an informed decision.

The Advantages of Credit over Cash

You Can Build Your Credit Score. 

One of the most significant advantages of using credit is that it can help you build your credit score. A good credit score will give you access to better interest rates on loans and lines of credit, saving you money in the long run. A good credit score can also make renting an apartment or getting a job more manageable. So if you’re looking to improve your financial situation in the future, using credit is an excellent way to start.

You Can Earn Rewards Points. 

Another advantage of using credit instead of cash is that many credit cards offer rewards points that can be redeemed for travel, merchandise, or money back. With cash, you can only spend what you have. But with credit, you can spend money you may not even have yet and still earn rewards like points, miles, or cash back. 

For example, let’s say you want to book a hotel room that costs $200 per night. You can book the space using your credit card and pay for it later. You’ll probably earn rewards points you can redeem for future travel expenses. On the other hand, if you pay for the hotel room with cash, you’ll have to save up to $200 first—and you won’t earn any rewards in the process. 

So if you like to earn rewards while they spend, using credit is the way. Just be sure to pay off your balance in full each month, so you don’t end up paying interest on your purchases.

You Have More Protection against Fraud. 

When you use a credit card, you have more protection against fraud than if you were using cash. Federal law limits your liability for unauthorized charges to $50, and many card issuers will waive this fee altogether. So if your card is ever lost or stolen, you don’t have to worry about losing all your hard-earned cash. 

The Disadvantages of Credit over Cash 

• You Might Overspend. 

One downside of using credit instead of cash is that it’s easy to overspend when you’re not tracking how much money you’re spending. It can lead to debt and financial hardship down the road. So if you tend to overspend, it might be best to stick with cash or use a debit card instead of a credit card. 

You Might rack up Interest Charges. 

Another disadvantage of using credit is that if you carry a balance from one month to the next, you’ll rack up interest charges that can add up quickly. So if you’re not careful, using credit can cost you more money in the long run than if you had just used cash in the first place. 

You Might Damage Your Credit Score. 

Another potential downside of using credit is that if you make late payments or default on your debt, it will damage your credit score. It can make it difficult to borrow money in the future when you need it and could even lead to higher insurance premiums and apartment rental rates. So if you’re not confident in managing your finances responsibly, using credit might not be your best option. 

As with anything, credit and cash have advantages and disadvantages. But it comes down to it; we believe that credit is the better option for most people. With credit, you can earn rewards, build your credit score, and enjoy more protection against fraud. 

So next time someone tells you that “cash is king,” smile and nod— knowing full well that they couldn’t be more wrong! Just remember to use it responsibly and always keep an eye on your spending so you don’t spend more than you can afford. Do you agree or disagree? Let us know in the comments below!