Why It Pays to Use a Credit Card Even When You Can Afford to Pay in Cash

by Maurie Backman | Published on Nov. 24, 2021

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A customer handing their credit card over the counter to the cashier at a cafe.

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It's all about extra perks and more protection.


Key points

  • There are benefits to paying for purchases with credit cards, such as reward points and purchase protection.
  • Though some people use credit cards when they're short on cash, it can also pay to use them when cash reserves aren't a problem.

There's a rule I've always followed with regard to my credit cards -- never charge more than you can afford to pay off at the end of the month. That's because I don't want to throw money away on interest. I figure that if I can avoid carrying a balance, I won't have to accrue any interest on my purchases.

Of course, in some cases, credit card interest is unavoidable, such as if an emergency expense arises and you don't have the cash on hand to pay for it. But even in situations where you do have plenty of cash at your disposal, it could still pay to whip out your credit cards to cover your various bills and purchases. Here's why.

Get rewarded for spending money

Whether it's large car repair bills, medical bills, or everyday purchases like gas and groceries, by charging expenses on a credit card, you can rack up reward points or cash back. That's the same as getting free money. When you pay for items in cash, you don't get anything back.

Furthermore, credit cards commonly come with sign-up bonuses that allow you to score a lump sum of cash for charging a certain amount of purchases within a few months of opening your account. In some cases, that sum can be substantial, and by using credit cards, you can actually improve your financial situation.

Get protection cash doesn't offer

When you buy things with cash, you get little protection if things go awry. But when you charge purchases or services on a credit card, you have more options if the merchant or service provider in question tries to pull a fast one on you.

Imagine you buy an item from a store and it turns out to be defective once you take it out of the box. The merchant might insist the item was fine at the time of the sale, and that you're the one who broke it and therefore can't get a refund.

In that situation, you'd be protected if you bought that item using a credit card. All you need to do is dispute the charge and let your credit card company launch its own investigation. But a cash purchase in that same situation could mean not getting your money back.

How to avoid getting burned by credit cards

It's true that credit cards can open the door to excessive spending, which is why some people prefer to pay for purchases with cash as long as they have the money available. If you've had trouble managing your credit cards in the past, or if you don't trust yourself with them, then using cash may be a better bet for you.

But if you have a history of using credit cards responsibly, then you should know they don't need to be reserved solely for periods when you're low on money. Rather, you can use them all the time and enjoy the perks they offer.

That said, if you want to make sure you're not charging too much on your credit cards, put a reminder on your calendar to check your balances every week. That way, if you see numbers that are higher than expected, you can curb your spending until your next billing cycle.

On my end, I recently used a credit card to pay for a home repair that cost me nearly $7,000. I had the money in savings, but by using my credit card, I got $70 of that bill returned to me in the form of cash back. Granted, that $70 didn't make a huge dent in the overall bill. But the way I see it, it's $70 more than I would've had otherwise.

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