What Type of Payment Should I Use? When to Use Cash, Credit, or Debit

by Melanie Lockert · 7 comments

The beauty of personal finance is that it’s personal. We all have our preferences on how we save money, what we spend money on, and even what we spend money with.

Everyone has a strong preference from cash to credit to debit. Some people swear by cash, while others never carry the stuff. So, what type of payment method should you use? Well, the correct answer depends. I’m breaking down the good, bad, and ugly of cash, credit, and debit.


They say cash is king. Cash definitely has a certain power to it and for some people, it’s their go-to budgeting standby. For those working their way out of debt, using cash is a great option because absolutely no one is going to let you spend more than the cash you have on hand.

You spend what cash you have or what is in your bank account. There’s a reason why challenges like cash detoxes and the envelope budgeting system are so popular for those getting out of debt. The thought is that cash, with its physical presence, is harder to give up. Once we part with cash, we feel the difference in our wallets. It’s a huge difference from the potential of mindless swiping with a credit card.

So, when should you use cash?

  • If you are getting out of credit card debt. For other types of debt, using cash can help you too.
  • At local mom and pop shops. Small business owners like cash, because they don’t have to pay credit card payment fees. While there are less and less places today that are cash only, and especially since the pandemic when all kinds of mom and pop shops have embraced the use of plastic, you’ll want to be prepared and also support the local economy.
  • When tipping! You can leave a tip on a credit card, but I think giving a cash tip is always nice for service workers.
  • Yard sales or buying things on Craigslist. Once again, cash is king. Whether it’s at yard sales, the online marketplace, or Craigslist, people want cash. If you’re serious about a purchase, make sure you have cash on hand or risk missing out.

The downfalls of cash? It’s hard to keep track of and if you lose it, it’s gone. If your cash gets stolen or you simply misplaced a stack, you’re out of luck.


In the personal finance world, it seems like people either love credit cards or think they’re evil. But credit cards themselves aren’t inherently evil, just as money isn’t inherently evil. It’s what we do with them that can lead us astray.

When should you use credit cards?

If you are a responsible credit card user by paying your balance in full every month and keeping your credit utilization at 30 percent or lower, credit cards can be a nice way to:

  • Track your spending
  • Reap cash back or travel rewards
  • Get fraud protection for your purchases

Credit cards are a good option for:

  • Business expenses
  • Big purchases that you can pay off right away
  • Travel hacking purposes, in order to get discount travel

The downsides of credit cards are that they can easily lead to debt if you aren’t careful. Not only that, but using credit cards can also inadvertently increase your spending. Several studies have shown that consumers spend more with credit cards.

It’s easy to swipe now and think you’ll pay for it later. Yes, you may have the cash later, but do you have it now? These are important questions to ask when using a credit card because you avoid any problems down-the-line. Another thing to consider is the influx of data breaches, leaked credit card information, and identity theft.

Unfortunately, we live in a time where our personal information can easily be hacked into and used to our detriment.


Debit cards are as convenient as credit cards, but with the stability and budget-consciousness of cash. Using your debit card is a great way to have the best of both worlds – using cash, but with the flexibility of a card.

When should you use debit cards?

  • If you want to track your spending
  • Only spend the cash you have
  • Not carry around wads of cash, but still use a cash equivalent

I think in some ways you can still overspend with a debit card, because you just have to swipe your card. But with a debit card, it’s key that you check your balances regularly to avoid overdraft fees. Start by creating a daily habit of checking your balances and tracking your spending.

In the end, whichever form of payment you use is personal. However, empower yourself to spend more efficiently and live based on your values by choosing the form of payment that fits your lifestyle.

What’s your preferred payment method? Do you use cash, credit, or debit? Why?

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  • Jordan says:

    Good resource here. There’s often a little internal debate myself when to use cash or debit (I know when to use credit, at least!) so this is a good thing to keep in mind. I’d agree with you about tipping in cash – something about it seems better.

  • Walt says:

    We use a cash/debit card existence. My wife has a credit card with a low limit and is paid off every month. I’m from the baby boomer era and we were brought up to use credit to satisfy our wants. Even the government encouraged spending, giving you a tax write off for the interest. ‘For everything else there’s Master Card’, changing old habits was a 5 year trek and I plan to never go back. We pay everything online for the convenience and record keeping. I draw enough cash to make it a week and when that’s gone so is my spending. We have a long term & emergency savings plan. I am tempted to get a card but remember the out of control period, vowing never to go back. Giving up the rewards is my penance and since I don’t fly or travel as much now I don’t miss them.

  • Young Millennial says:

    Right now we use a combination of credit and cash. Our debit account only has a few free transactions per month so we save them for our fixed expenses like mortgage, car payment, utilities, etc.

    For everyday purchases we use cash since I tend to go to the market on a daily basis and vendors don’t accept anything else. If we run out of cash, we use credit cards, but make sure to deduct the amount on the credit card from our next week’s cash allowance. I have been reading about travel hacking so we might get back into using only credit cards in the near future.

  • Roman Sidorenko says:

    We usually use cash. The only thing with use a credit card for is the automated payments for services such as our cellphone provider. What we have on our credit card are only reoccurring bills which we can track and deduct from our budget.

  • Nigel says:

    I use credit card for almost everything but then pay it off in full when it is due – so no interest payments. No going to the ATM to get cash, money in the bank keeps earning interest during the credit card interest free period. Works for me.

  • Eric says:

    I always go grocery with cash and than practically everything else I will use a visa debit card. Though when I go to charge it I always make sure to charge it as a credit not debit. A few reasons I do this is first I want the protection has a credit card, and also I only get so many debit changes per month from my bank.

    I have always wondered what the point of having a credit card when you can do practically everything that a credit card can do with your debit. Though recently I been tempted to give a credit card a chance in looking at some rewards.

    This was an great post thanks for sharing!


  • Cyrus says:

    My wife and I do not own any credit cards. We run roughly one fourth of our monthly budget with cash (groceries, dining out, babysitting, gas, individual misc. money) and half with our debit cards, mostly on auto-payments. The other quarter is retirement contributions and other savings.

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