When to Use Cash, Debit or Credit

I got my nails done yesterday and saw a sign that said they only accept checks or cash as payment. OK, A.) Who carries cash and, B.) Who writes checks? I was just planning on using my debit card, but nope! So that got me thinking, when is it OK to use cash, when should you use the credit card and when should you use your debit card? 

Small Businesses

Do you like to shop at small businesses? I try whenever possible. Especially when I’m trying to find a unique gift for someone. Many credit card companies charge retailers a fee. Sometimes it’s as much as three percent of the purchase price to process credit card transactions, so if you’re going to be shopping at a small independent business, it’s best to pay with cash so they don’t get charged.

Shopping Online

When you're shopping online, it's a good idea to use an actual credit card. That's because many credit card companies have stronger fraud protection just in case someone gets a hold of your number. Many companies have a zero liability clause in their contracts so you don't lose money should something happen.

Budgeted Purchases

If it's something you planned on spending and have the money in your bank account for, go ahead and use your debit card. This is good for automatic bill pay, or groceries.

Eating Out

When you go to a restaurant and pay with a credit card as many people do, there’s always a space for gratuity which helps because I don’t always carry cash. I just learned that some bars and restaurants don’t always pay out the tips until the end of the week and as a former waitress, I can tell you that having cash in hand at the end of the night is super handy, so if you’re going out to eat, going out for a drink or getting some sort of service like a manicure, pedicure or haircut, carry some cash.

On Vacation

When you're going to be spending a considerable amount of time on vacation, it's a good idea to use a credit card for this one. That's because many airlines and hotels give you perks and bonuses if you use certain credit cards when you book and while you're there. It's also because if you use your debit card, the bank may put a hold on your money until the payment clears.

Foreign Currency

Speaking of vacation, and I know I just said to use your credit card, but if you need to get foreign currency, it's best to use your debit card, rather than the cash in your wallet. That's because banks can quickly and automatically calculate the correct exchange rate to get you the exact amount you need. It's also a good idea to use an ATM inside an actual bank, rather than the one out on the street.

Gift Buying

Buying a birthday gift for someone? Pay with cash. That way if you buy something for someone from a store they hate, they’ll get the cash back. If you pay with a card, they’ll likely just get store credit for it and if it’s a store they don’t like or can’t shop at, it’s worthless. If you’re buying something for you, you should still pay with cash because if you have to return it, you may not get the money back right away in your account. If you pay with cash, they’ll just hand the money over.

Big Purchases

If you're buying a big ticket item like a TV, gaming system or furniture, use a credit card. That's because some credit card companies offer buyer protection so in case your warranty runs out, you and your purchase are still protected.

Money Mismanagement

Are you bad with money? Don't get a credit card. Use cash or a debit card. That way you can't spend more money than you have.