When Should I Use Cash Or Credit?

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Cash or credit, it’s the endless debate. Some of us prefer the convenience of credit, but if we’re not careful, we could end up with a ton of debt. On the other hand, cash can help keep our spending under control, but we lose out on the benefits that credit offers.

Personally, I prefer to use credits cards whenever I can. The way I see it, credit card companies are paying me in rewards to use their cards. That being said, I certainly understand why many people much prefer using cash. Regardless of what you prefer, there are situations when one option makes more sense than the other.

When to use credit

When we’re responsible with our credit – As long as we’re paying our bills in full and on time, then there’s no reason why we shouldn’t use credit to take advantage of benefits. Travel rewards, cash back, and store credit are just some of the benefits we can get while using credit. Even if we’re good at managing our finances, it’s still a good idea to track our spending so we don’t blow our budget.

Building our credit – Eventually we’ll all need to borrow money one day so it’s in our best interest to start building our credit score. One myth about building credit is that we need to carry a balance; this is untrue! The reporting agencies simply want to see that we’re meeting our debt obligations on time, so making a few small transactions and paying it off every month will help increase our credit score.

When we travel  – Using credit cards for travel can benefit us in a few different ways. A travel rewards card will usually offer travel medical, trip cancellation/interruption, and lost/delayed luggage insurance. A foreign exchange free credit card will eliminate those fees charged when making a transaction in a foreign currency. Credit also makes travelling safer since we won’t need to carry around large sums of cash.

Do you use cash or credit when shopping?

When to use cash

It if helps with our budgeting – Everyone budgets differently so there’s nothing wrong with using a cash-based system. Some people use jars, some use envelopes, the point is to set aside cash every month for certain expenses e.g. eating out, shopping. This system is pretty straight forward, once we’re out of money for the month it means no more spending. Cash or credit budgets don’t really matter, just pick one that works for you.

We’ve had debt problems in the past – Debt is a beast, it can creep up and attack anyone of us, at any time. If we’ve had debt issues in the past, it’s probably a good idea to use strictly cash for a little while to keep ourselves honest. Not only will cash force us to save for the things we want, but it’ll also encourage us to spend less.

If we’re worried about fraud – There’s been a lot of data breaches as of late and many people have had their credit cards compromised. If fraud is a concern, then using cash is the safest way to protect ourselves since it doesn’t leave any traces. Keep in mind that our Interac debit cards have a lot of security features including a zero liability clause so it’s almost as safe as using cash.

Final thoughts

These are just a few situations where cash or credit can have its advantages, what you decide to pay with is really up to you. That being said its been proven that when we use credit, we naturally spend more since we don’t physically see the money disappearing.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Our Big Fat Wallet on June 12, 2015 at 2:36 PM

    I only use cash for basic things under $10 or when credit isn’t available. Everything else is credit – too many good rewards (especially cash back) to pass up on

    • Barry Choi on June 12, 2015 at 2:39 PM

      Our Big Fat Wallet,

      I’m the same way. Only time I use cash is when credit is not accepted. Even if it’s $1 at Tim Horton’s, it goes on credit.

  2. Sean Cooper, Financial Journalist on June 13, 2015 at 10:56 PM

    It looks like you both Smallenfreuden. While credit cards are a nice way to earn rewards, don’t forget the interchange fees are costly to small retailers. I would rather pay cash at a small mom and pop retailers to help out their bottom line.

    • Barry Choi on June 14, 2015 at 12:07 AM


      Ha that was an awful campaign, I’m surprised you remember the term. Yes at small retailers I do try to pay cash, otherwise I card when I can.

  3. Jordann @ My Alternate Life on June 24, 2015 at 8:19 AM

    I primarily use credit, but I watch my budget like a hawk to make sure I don’t overspend and blow my budget. The only place I use cash these days is at the farmer’s market, since most of the vendors are cash only.

    • Barry Choi on June 24, 2015 at 9:32 AM


      Yes I still track my spending too since I charge everything. I do try to use cash at small businesses so they don’t have to pay the merchant fees

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