Cash: Some of us use it to pay for groceries, gasoline, and other essentials, but is paying with cash a good or bad thing?

While many of us opt to use cash, more of us are using plastic. But what’s better and for what?

Well, credit cards do offer some perks such as making more immediate purchases, getting rewards on said cards and spreading out the costs. However, paying with cash also offers several financial benefits and other advantages.

Buying Costs

One of the benefits of paying with cash is that you won’t have to pay interest. When you pull out the plastic, you typically pay anywhere from 10 to 25 percent in interest charges on top of what you paid for your purchases. Unless you pay off balances right away, those great sale prices become not so great in savings as time goes on.

Spending Discipline

According to an article in MSN Money, psychologists have said consumers spend more when paying with credit. Psychologically, can play an apart the article says, meaning you think more about the value of money and consequences of spending when you use cash. Consumers can easily detach themselves mentally and emotionally from their spending when using cards, it adds. You don’t hand over the money at the point of purchase; this isn’t quite as big a deal if you pay bills with credit, since the amount is static whether you pay directly from your bank account or with credit.

Important Tracking

Be aware, too, that cash doesn’t offer the same tracking that credit does, either. Also, paper receipts may be the only proof you bought something if you need a receipt in the end. When you choose a credit card, you not only receive a paper or electronic statement, but the transactions are maintained in the financial institutions records. This lets you gain access if you want to dispute a transaction or reflect on a past charge. Some financial institutions have spending trackers that break down card payments by category such as food and grocery, clothes, utilities, and car loans to make it even easier to track purchases.

Great Rewards

Perhaps one of the most popular perks about using credit cards over cash is that some credit card companies offer rewards, points, and even air miles to regular users. If you use cash, you don’t get these perks when buying items or services. Also, if you use a credit card but pay the balance within your 30-day grace period, you essentially benefit from a 30-day interest free loan. Essentially, you can buy something today, then pay the balance when your paycheck arrives without any financial repercussions. Plus, you get the points for later use on other items and essentials, you might need/want.

In the end, it is up to you how you want to pay for goods, services and everything else in between. Sometimes, it may make more sense to pay with cash like small purchases, such as the babysitter, or at a fast-food restaurant. For bigger purchases, like a new wardrobe, your electric bill or new car, a credit card may make more sense.

You must decide what works best for you and be comfortable with either pulling out your wallet for cash or your credit card!