Advantages & Disadvantages of Paying with Cash

Advantages & Disadvantages of Paying with Cash
••• Somsak Bumroongwong / EyeEm/EyeEm/GettyImages

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.

Advantages: 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.

Advantage: Keeping Debt at Bay

According to, Americans racked up $1 trillion in debt, $830 billion of which is from credit card usage. The site also reports that more than 126 million households have credit card debt exceeding $6,500. 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.

Advantage: Protecting Your Identity

The Federal Trade Commission reports that fraudulent use of credit and debit cards is taking place every single day. 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.

Disadvantage: 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.

Disadvantage: 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 no reference information via statements and online banking. Consumers must keep a purchase log to track their cash spending.

Disadvantage: 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.