What are the Pros and Cons of Spending Cash?

Cash is interest-free, which is one of the main pros of spending it. This means a person may spend less for purchases if he spends cash than if he uses a credit card and pays the interest that is added to it. Likewise, people are usually more likely to spend within their means and have a realistic view of their purchasing habits if they spend cash. One of the cons of spending cash, however, is the fact that it is irreplaceable. Additionally, cash purchases do not help a person build up a positive credit history.

One of the main pros of spending cash is the fact that there is no interest due on purchases made with it. When a person pays by credit card, he usually pays interest on the money he spends. This means each purchase actually costs more than the amount printed on the price tag. As such, a person may actually save money by purchasing with cash rather than using credit cards.

Another pro of spending cash concerns a person’s mindset when he is making purchases. When a person spends cash, he is faced with the reality of the amount of money he is spending. Often, people think twice before spending cash, as they can easily relate the expenditure of their money to the amount of time they spent working for it. In many cases, however, people lose some of the reality of how much they are spending when they use credit cards.

When a person spends cash, he is usually more likely to stay within his means. People often spend more than they can afford when they use credit cards. They are often able to convince themselves that they will be able to afford the purchase later. This line of thinking may backfire, however, as the individual may have trouble paying more than the minimum on his credit card account each month, which translates into hefty interest costs over time. In fact, the individual may spend months or even years paying off a purchase that he couldn’t really afford.

One of the cons of spending cash is the fact that it is irreplaceable. When a person carries cash for purchases, there is always the chance that he will lose it or someone will steal it. In the event that either of these things happens, the unlucky person cannot replace the money. If a credit card is lost or stolen, on the other hand, the credit card company usually assists with replacing it. In many cases, the cardholder isn’t responsible for any purchases a thief makes using his card.

The lack of credit building is another con of spending cash. When a person makes purchases with credit and pays his bills on time, he is building a solid credit history. This may prove helpful when he wants to buy a house or a car, for example. When an individual spends only cash, however, he does not build his credit history and may have a harder time qualifying for loans.