With over 32 million credit card holders in the UK, many consumers reach for their credit card rather than cash when making a purchase.
Looking ahead, credit cards are likely to increase in popularity, with improving technology increasing their speed and ease of use compared with cash. However, there are some instances where cash may still hold greater appeal than a credit card. And with personal circumstances dictating which of the two methods is most suitable for an individual, it may be a good idea to have access to both.
Cash allure
While improvements to technology mean that it is easier than ever to keep track of how much has been spent on a credit card, using cash may make budgeting easier. Consumers who use cash for purchases are only able to spend what they have in their purse/wallet and/or current account. As a result, they will not incur interest charges from overspending, which is a possibility when using a credit card.
In fact, studies have shown that individuals who use cash typically spend less than consumers who use credit cards. While this may not be true for everyone, cash could help to reduce expenditure given its direct and instantaneous impact on a current account balance.
Although an increasing number of retailers accept credit cards, some smaller independent stores only accept cash. While such shops may be in the minority, having access to cash could prove useful in some situations.
Furthermore, there is no annual fee to pay when using cash, while some credit cards can charge significant sums each year.
Credit card appeal
Of course, credit cards also have a number of appealing characteristics. They provide an individual with an extended time period in which to pay for a variety of goods and services. This may prove useful in a situation where an individual is unable to afford a necessity, such as a house or car repair, at a particular time, but will be able to afford it in a few weeks’ time, for example following pay day.
Using a credit card is becoming faster thanks to improved technology. Contactless payments are almost instant and provide a degree of convenience for users. Improving technology also means that shopping online is becoming increasingly popular. Clearly, using cash is not a possibility when shopping online, which makes having a credit card more attractive.
Credit cards also help to build an individual’s credit score, which could prove useful when seeking credit such as a mortgage further down the line. They also offer protection for any amount spent over £100 in a single transaction, which is important if a company fails to provide a good or service as specified when purchased.
Using credit cards could also improve consumers’ financial situation. Reward and cashback cards are becoming increasingly popular and could provide consumers with an incentive to use their credit card over cash.
Takeaway
Cash and credit cards both have their pros and cons. As such, it appears to be logical to have access to both when making purchases, with different situations and circumstances likely to dictate which one is the better option. As technology improves, credit cards may become increasingly popular. But, for now, carrying around a small amount of cash seems to be worthwhile.
