Choosing how to pay — credit or cash — can make a real dollar difference. Personal finance experts say there are five purchases where it’s especially smart to avoid cash and reach for a credit card instead.
Choosing the best way to pay for something — credit or cash — can make a real dollar difference for you. So knowing when to do which is key.
Personal finance experts say it’s especially smart to avoid using cash for these five types of purchases:
1 Digital Services
Paying with a credit card can help keep your digital purchases protected — and your loved ones happy.
This includes e-books, games on Facebook, ring tones — anything delivered digitally. If you pay with cash, or more likely with a debit card, the money is gone from your account immediately. Credit cards offer protections if you didn’t get what you paid for.
2 Electronics and Warrantied Products
Next time you buy electronics, check your credit card benefits for a potential warranty boost.
For items that come with a warranty, using a credit card can often extend that warranty by up to a year.
3 Products or Services Not Yet Received
Using a credit card can help cover you in case a move doesn’t go as planned.
If the flowers aren’t delivered, the furniture is damaged or the movers didn’t do everything the contract said, you’re not immediately out of the money if you used a credit card.
4 Travel
Get free checked bags when you pay for your next flight with the right card.
You may need a card to reserve your hotel room, and if you use a debit card, there can be a “hold” on your card for at least the expected total. If you use a debit card for gasoline, the hold it puts on your money may be for more money than you actually used. In contrast, putting air travel on an airline credit card can often give you perks like free baggage. And many credit cards offer free car rental insurance and trip interruption insurance.
5 Event Tickets
Avoid paying with cash to protect yourself from scams at the stadium.
Counterfeits abound. And if you paid cash for tickets that won’t get you in the gate, it’s gone.
6 The Advantages of Using Plastic
Dan Andrews, a certified financial planner in Fort Collins, Colorado, warns that cash and, more recently, prepaid cards are the preferred currency of scam artists. And once you hand over cash or funds from a prepaid card to a scammer, it’s likely lost forever.
Another advantage of using plastic: Your credit card company will help you if you don’t get what you paid for, says Morris Armstrong of Armstrong Financial Strategies in Cheshire, Connecticut.
“The beauty of credit is, you always have recourse,” he says.
If you pay with cash, your best shot at recovering your money when there’s a disagreement is in small claims court, Armstrong says.
Armstrong and Andrews say that keeping your tax-deductible expenses on a credit card can be a big help at tax time, too.
Of course, cash is often the only option when you’re buying something from a garage sale or on Craigslist. So the price of a vacuum cleaner found at a moving sale may well be worth the risk of paying cash.
Cash also can be an easy way to stick to a budget, if you give yourself a set allowance each week. But if you pay off your credit bills each month, using a credit card could help you earn rewards and protect your purchases.
Usually, the choice is fairly straightforward, says Megan McCoy, a financial therapist. “Use a credit card if you can pay off your balance. Don’t do it if you can’t.”
The potential rewards for using a card won’t outweigh what you’ll pay in interest if you carry a balance. And if you normally carry a balance, McCoy says, you may want to take a look at building a more realistic budget.
Bev O’Shea is a writer at NerdWallet. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.
The article 5 Times to Stash Your Cash and Pay With Plastic originally appeared on NerdWallet.
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Frequently Asked Questions
Why should I use a credit card for digital services?
Digital purchases like e-books, games on Facebook and ring tones are delivered immediately, so if you pay with cash or a debit card the money is gone from your account right away. Paying with a credit card offers protections if you didn’t get what you paid for, helping keep your digital purchases protected.
Can a credit card extend a product warranty?
Yes. For items that come with a warranty, using a credit card can often extend that warranty by up to a year. Before you buy electronics or other warrantied products, check your credit card benefits for a potential warranty boost so you get the added coverage automatically.
Why is a credit card safer for travel than a debit card?
When you reserve a hotel or buy gas with a debit card, the company may place a hold on your account for more than you actually spend. A credit card avoids tying up your cash, and putting air travel on an airline credit card can add perks like free baggage, plus many cards offer free car rental and trip interruption insurance.
What is the main advantage of paying with plastic?
The main advantage is recourse. As Morris Armstrong puts it, “the beauty of credit is, you always have recourse.” Your credit card company will help you if you don’t get what you paid for, whereas if you pay cash your best shot at recovering money in a dispute is small claims court.
When is it still okay to pay with cash?
Cash is often the only option for garage sales or Craigslist purchases, so the price of something like a used vacuum cleaner may be worth the risk. Cash can also help you stick to a budget with a set weekly allowance. But only use a credit card if you can pay off the balance, since interest can outweigh any rewards.
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Choosing how to pay — credit or cash — can make a real dollar difference.
Choosing the best way to pay for something — credit or cash — can make a real dollar difference for you.
Personal finance experts say it’s especially smart to avoid using cash for these five types of purchases.
Paying with a credit card can help keep your digital purchases protected — and your loved ones happy.
This includes e-books, games on Facebook, ring tones — anything delivered digitally.
Next time you buy electronics, check your credit card benefits for a potential warranty boost.
For items that come with a warranty, using a credit card can often extend that warranty by up to a year.
Using a credit card can help cover you in case a move doesn’t go as planned.
If the flowers aren’t delivered, the furniture is damaged or the movers didn’t do everything the contract said, you’re not immediately out of the money if you used a credit card.
Get free checked bags when you pay for your next flight with the right card.
You may need a card to reserve your hotel room, and if you use a debit card, there can be a “hold” on your card for at least the expected total.
Avoid paying with cash to protect yourself from scams at the stadium.
Counterfeits abound.
Dan Andrews, a certified financial planner in Fort Collins, Colorado, warns that cash and, more recently, prepaid cards are the preferred currency of scam artists.
Another advantage of using plastic: Your credit card company will help you if you don’t get what you paid for, says Morris Armstrong of Armstrong Financial Strategies in Cheshire, Connecticut.
