Cash might have been king in the past, but nowadays, in the digital era, fewer and fewer people use cash to pay for their purchases. Obviously, having cash on hand can be advantageous in certain situations like at the flea market, when paying for gas or when you don’t want your purchase to show up on a bank record.
However, using cash also comes with its own disadvantages, as most financial experts tend to agree. “While cash may offer some benefits, such as anonymity and control, it can also be risky and impractical for certain types of transactions,” says financial expert Chris Ratigan, VP of business development at Monterey Financial Services. “By using alternative payment methods, such as credit cards, you can protect yourself and your finances.”
That being said, here are 5 purchases you should never make with cash.
Cars
Buying a car can make a huge dent in someone’s budget. As explained by Jack Prenter, CEO of DollarWise, care dealers usually “charge low-interest rates because they know that the average consumer can’t afford the cost upfront”. Therefore, even if you have the financial resources to buy the car in cash, it’s sometimes wiser to pay the low interest rate, stick with the cash and invest it.
This is usually valid when it comes to large purchases such as cars or houses. Not only can you get robbed of your cash, when having large amounts of cash, but for such purchases it’s essential that you have bank records of the deals.
You might also learn something useful by reading this article on:10 Things Frugal People Never Do and Neither Should You
Bills
Purchases that have to be paid based on contracts, such as rent, utilities or insurance, should not be paid in cash, says Natalie Warb, financial expert at CouponBirds. Instead, she suggests using credit cards, money transfers or debit cards.
That’s because payment in cash cannot be recorded and tracked as easily as digital payments. Your only payment evidence is a printed receipt which can be easily misplaced or lost. Digital payments are preferred because you can make them from your couch, without having to go in person. In addition, it’s a good method to keep track of your monthly spending and adjust it accordingly, says Warb.
According to Bailey Schramm, finance advisor at BizReport, medical bills, which can be quite costly, should never be paid in cash. Lack of a payment record can make it difficult to receive any insurance reimbursement.
See also 5 Subtle Ways You Are Sabotaging Your Budget
Travel expenses
Whether you want to book a hotel room, flight or rent a car for a future family holiday, financial experts all agree that a credit card is the better payment option than cash. For one, “many credit cards offer benefits like flight cancellation insurance, lost baggage insurance, and reimbursement for expenses if you need to stay overnight because of a canceled flight,” explains Prenter. Another situation when cash could work against you is if you need to leave your booked hotel room and get charged for facilities you didn’t use. You can ask for the support of the credit card company to get the money back but if you’ve paid in cash, it’s just you against the hotel administration.
Needless to say, cash payments will not bring you any rewards points or cash-back offers provided by credit card companies for travel expenses.
Check out: Healthy Spending Habits? 5 Rules the West Coast Can Learn from The East Coast
Electronics
This is another example that financial experts recommend against using cash. Purchases such as television sets, laptops and the like, should always be paid by credit card or debit card, say money specialists. The main reason is that these digital methods provide better protection in case there’s a problem with the product or its delivery.
In many cases, credit card companies provide extended warranties if items break during shipment. As explained by Prenter, if you order and don’t receive an online product, it might be necessary to do a chargeback. In such cases, paying in cash will not be of much help, as you might end up without the product and the money.
Business expenses
Looking to upgrade your office with some new furniture? Need to fill up your rank for a work-related trip? Taking a client out to lunch? These are all business expenses that should never be paid with cash. That’s because such expenses need to be properly recorded so that they can be reimbursed or taxed on behalf of the company, says Nikolay Iliev, a personal finance expert and founder of the VAT.
In some cases, credit cards might not work. If so, use checks or money transfers. It’s easier to track than collecting all the cash receipts for all the work-related purchases you’ve made. It’s also safer to use digital methods with clear track records in the case of audits, especially if you’re self-employed or have a business of your own.
On the other hand, if you’re still old school and can’t give up using cash, check out what financial experts had to say about situations when cash is recommended. Read on to find out x purchases you should always make with cash.
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Items you might return
If you’re not really sure about your purchase and think you might return it at some point, then paying with cash is a better option, explains Steven Holmes, a financial expert and the senior investment advisor at iCash.
This method will prevent you from having to wait to get a refund. Presently, most stores give your money back using the original method of payment used for your purchase. If you’ve used a credit card, you’ll get the money in your bank account, but this could take several days. If you have a cash receipt, you’ll get a refund instantly after returning the product.
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Online secondhand purchases
Online marketplaces such as Facebook or Craigslist are widely popular. And why shouldn’t they be, as they can save you some pretty bucks on your purchases? However, according to Jake Hill, a financial expert and the CEO of DebtHammer, not just any payment method is safe when it comes to purchases from online sellers. After all, they are complete strangers and cannot be fully trusted. Instead of using a credit card and risking being scammed, opt for cash on delivery.
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Getting gas
Next time you want to pay for gas, use cash instead of a credit card, recommends Bill Ryze, a certified financial consultant and board advisor at Fiona. For one, you might get a discount for paying with cash. Secondly, to balance the effect of transaction fees from banks and credit card companies, gas stations have higher prices when customers pay with credit cards. It might be unfair but it is what it is. Why pay as much as 40 cents more with credit cards, when you can easily get the same at a cheaper price?
Not to mention you avoid getting your sensitive information stolen, as some gas stations might be the target of cyber criminals. They use devices called “skimmers” to steal your credit card info, warns Williams Bevins, CFP, a licensed financial advisor based in Franklin, Tennessee.
