Advantages and Disadvantages of Paying with Cash

by Jamie Witt ; Updated May 01, 2018
Paying with cash may help consumers protect their security and credit.

Business.gov reports that more and more cash-only businesses are weighing the pros and cons of their payment system. Much advancement in technology, particularly on the Internet, deters – or even flat out – prohibits cash payments. However, in an ever-changing marketplace, consumers should consider the pros and cons of paying with cash.

Spending Within Your Means

The simplest advantage to paying with cash is the limitation it puts on what you buy. Without a buy-now-pay-later mentality associated with credit cards, you will purchase only items that are affordable, and covered by the cash you have on hand. This way, you never have to worry about buying anything you can't afford at the moment. Paying with cash also helps to curb impulse spending habits.

Keeping Debt at Bay

Between 2006 and 2007, Americans racked up $2.5 trillion in debt, mostly from credit card usage, according to Financial Web, which also reports that more than 8 percent of households have credit card debt exceeding $9,000. Interest rates, annual fees and other charges can make a consumer’s monthly credit card bill skyrocket and get them into a vicious cycle of debt that is difficult to overcome. By paying with cash, consumers may protect their credit and avoid unneeded debt.

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Protecting Your Identity

ConsumerFraudReporting.org reports that in 2008, fraudulent use of credit and debit cards was one of the top three complaints of Internet fraud by consumers. By using cash, you protect your identity and your credit. You can use your card safely online, as long as you take the steps to protect yourself ,such as having the most up-to-date virus software and changing your passwords often.

Limited Shopping Opportunities

Online shopping is 100 percent reliant on credit cards, debit cards and other payment-transfer services that are Internet based. The Internet is a cash-free zone, so having some sort of way to pay for online purchases such as bank debit cards or prepaid credit cards, allows you to take advantage of convenient online shopping.

Limited Record Keeping

Consumers generally need a receipt of purchase in order to make a return or exchange on a product. Many retailers can access a transaction made on a credit or debit card by entering a buyer’s card number into their system and moving forward with the transaction; there is no reference information associated with cash transactions. Purchases made via credit or debit card are easy to track via statements and online banking. Consumers must keep a purchase log to track their cash spending.

Security Concerns

Consumers can cancel their credit and debit cards soon after they discover them lost or stolen. However, there is no accountability for lost or stolen cash. Because there are no identifying factors to relate a dollar bill to its owner, it is highly doubtful that lost cash will be returned to a consumer. Carrying large sums of cash may also pose a security threat; large bills especially should be kept in a secure place, such as an enclosed purse.

About the Author

Jamie Witt began her writing career in 2005 by assisting in the launch of a daily newspaper. Previous roles in newspaper have included reporter, photographer, copy editor and assistant managing editor. She moved into advertising with an emphasis on public relations, copy writing and copy editing. Witt studied Journalism and English at Indiana University.

Photo Credits

  • money makes money image by Andrey Andreev from Fotolia.com
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