The two most common payment methods today are the cash and the credit card. This is, especially, true in the western world where it is not uncommon for a person to have many credit cards. Some people have become so used to credit cards that they don’t even both carrying cash with them. Cash and credit card may share some similarities but they also have certain different characteristics which may explain why some people prefer cash while others prefer credit cards.

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One of the similarities between cash and credit cards is that they are accepted at most places in the U.S. But cash enjoys a little advantage because not all places may have credit card machines. In addition, retailers have to pay fees on the credit cards, thus, they may require the customer to meet a certain minimum purchase criteria in order to be able to pay with a credit card.

Both cash and credit cards carry risk though the nature of the risks may be different. One of the shortcomings of cash is that an individual cannot recover it if he may have dropped a wallet somewhere or someone merely took off with his cash. A credit card does offer insurance against unauthorized use since that individual can call the issuing institution to cancel the card. Many card issuers even reimburse the card holders for unauthorized payments from a stolen credit card. But the theft of cash usually results in monetary loss only where as the theft of a credit card may impose many other costs on the card holder such as an identity theft. Another shortcoming of the credit card is that a card holder may not even be aware of the identity theft, and he might have incurred a significant loss by the time he finds out.

When making a purchase with cash, one is usually limited by the amount of cash he is carrying and one can only carry so much cash. This does introducing spending discipline. Moreover, a purchase with cash doesn’t result in a debt because cash is the purchaser’s own asset. On the other hand, credit cards often have high spending limits which may cause the card holder to overspend. As a result, it is more difficult to maintain spending discipline with a credit card than cash. It is also important to note that credit card is like a debt which has to be paid off later. Since credit card balances may result in interest payments, the actual purchase may end up being more expensive with credit cards than cash.

While cash is accepted at more places than a credit card in the real world, things are different online. It almost always involves a use of a credit or debit card when making an online purchase. Thus, a credit card is becoming a more useful form of payment due to growing role of internet in our lives. While some online vendors may accept non-credit card payments, such a purchase process is likely to be slow.

Cash mostly serves the purpose of payment only but a credit card may also serve other purposes such as building one’s credit history. There is no current method in the U.S. that tracks one’s cash purchases and payments to determine his credit risk. On the other hand, credit card payment and balance history is used to build one’s credit history. It may be accurate to say cash is becoming outdated due to the growing role of technology in our lives.

Both cash and credit card continue to be main forms of payment. While they share some characteristics, they also have differences. Cash may be accepted at more places in the real world but credit card is the kind in cyber world. Cash helps one maintain a spending discipline while it is harder to control spending with credit card. One owns cash but credit card is a form of debt. A credit card purchase may be more expensive if one pays interest on balance as well. But credit card also serves other purposes such as helping one build a credit history. Credit card may eventually replace cash as the most important form of payment due to growing role of technology in our lives.