Cash, Credit, or Debit – What’s the Best Way to Pay?

Man paying with a card

Every time you buy something, you have a decision to make – cash, credit, or debit? Some people commit to making all their payments in cash, while others are more comfortable using a debit or credit card. You might wonder: is there ever a “right” way to pay?

In short, there are pros and cons to each payment method. Below, we’ve compiled some tips on when it might help you most to pay with cash, a credit card, or a debit card.

Paying with Cash – The Pros

Paying with cash can be a good way to manage money and stick to a budget, especially if you tend to swipe your debit or credit card without thinking.

One way you can manage your cash is by using an envelope system. Create a budget each month and, after deciding what categories to divide your spending into, withdraw cash and put it into envelopes designated for each category. Throughout the month, only use the cash you set aside in each envelope to cover all your expenses. This provides you with a physical reminder of how much you’re spending and keeps you constantly aware of how much you have left to spend.

Outside of helping you stick to your budget, paying with cash can also be convenient. Once you’ve made a purchase or paid a bill, it’s done. Unlike with a credit card, there are no bills to keep track of each month.

Paying with Cash – The Cons

If you’re not using a structured method such as the envelope system, it may be difficult to keep track of your cash. Someone at work may be collecting money for a group gift or your child may come home from school asking for money for a field trip. Just a couple of these unaccounted-for expenses each month can leave your budget unbalanced.

Additionally, when you pay with cash, there’s no built-in security. If someone takes your money and does not deliver an agreed-upon product or service, the cash is gone. There’s no designated service center to call to dispute the transaction or get your money back.

Paying with a Credit Card – The Pros

One of the many benefits of using a credit card is the simple convenience of not having to carry cash. And by linking your card to your phone or smartwatch, you can pay for things quicker and easier than ever before.

A major benefit of many cards is the rewards they may offer, such as those you can receive using our Founder's Rewards Card. You can earn up to 2%* in cash rewards on every purchase every time and your rewards never expire.

Credit cards also offer an added layer of security. If you make a payment and don’t receive the good or service you paid for, you can contact your card issuer and dispute the charge. You can also do this if your card is used fraudulently. This helps protect you from any financial losses.

Credit cards can also help boost your credit score if you use them responsibly. Having a good credit score can increase your chances of getting approved for loans, apartments, and even jobs.

Paying with a Credit Card – The Cons

Paying with a credit card can sometimes be almost too convenient. This makes it easy to charge purchases or bill payments without even a second thought. It’s important to remember that, just as responsible use of a credit card can help your credit, irresponsible usage can seriously harm it.

If you’re racking up debt on a credit card that you can’t pay off in full each month, your credit could take a hit because of the higher amount you owe. You could also find yourself losing money to monthly interest charges. And if you rack up so much debt that you can't even make your minimum monthly payment, the damage your credit score takes could remain for up to seven years.

Paying with a Debit Card – The Pros

In some circumstances, paying with a debit card can be a happy medium between cash and a credit card. A debit card pulls money directly from a linked checking account, helping you ensure that you don't spend more money than you have. You can also use a debit card at most places that accept credit cards. This makes using them just as convenient and eliminates a stop at the ATM.

Some debit cards also offer rewards. For instance, if you’re a PSECU member, you can earn $.05 or $.10 on eligible purchases** when you use your PSECU debit card.

Debit cards can also provide a sense of security that cash can’t. Almost all debit cards have procedures for reporting them lost or stolen and disputing claims, as well as protecting them from associated liability.

Paying with a Debit Card – The Cons

Some vendors – such as rental car companies, hotels, or gas stations – may place a hold on any card when used to make a reservation or purchase. When this is done with a credit card, it impacts your available credit, but it does not take the cash out of your account. But when you use a debit card for one of these purposes, the hold causes you to have access to a lower amount of cash.

Also, a debit card may bear the logo of a major credit card issuer, but it doesn’t help you build credit. This means that even if you’re paying your bills on time and in full, good behavior won’t help you secure loans or other credit products in the future.

So, What’s the Best Way to Pay?

There’s no one right answer when it comes to whether it’s better to pay with cash, credit, or debit. Fortunately, no matter what method you prefer, we at PSECU can help. From thousands of convenient ATM locations to debit card rewards and several credit cards to choose from, we’re here to make your wallet work for you.

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*You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. Some exclusions may apply.  See theVisa®Founder's Card and Visa®Alumni Rewards Card Rewards Program Terms and Conditionsfor full details. 


**You can earn $0.10 cash rewards on eligible purchases of $10 or over with a PSECU checking account and one or more qualifying monthly direct deposit(s) totaling at least $500. You can earn $0.05 cash rewards on eligible purchases of $10 or over for accounts with a PSECU checking account. Certain restrictions may apply. See the Visa® Debit Card Rewards Program Terms and Conditions for full details. 

The content provided in this publication is for informational purposes only. Nothing stated is to be construed as financial or legal advice. Some products not offered by PSECU. PSECU does not endorse any third parties, including, but not limited to, referenced individuals, companies, organizations, products, blogs, or websites. PSECU does not warrant any advice provided by third parties. PSECU does not guarantee the accuracy or completeness of the information provided by third parties. PSECU recommends that you seek the advice of a qualified financial, tax, legal, or other professional if you have questions.