Personal Finance

Credit Cards Are the New Cash - Why You Should Ditch Paper Money Now

David Beren

Published: December 9, 2024 2:59 pm

Key Points

• Credit cards have quickly outgrown cash use in the last five years. 
• Using credit cards gives you extra buying power, so long as you are careful. 
• It’s easy to go into debt with a credit card. 
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In the world of spending, credit cards have quickly become the best way to go about and make purchases. Credit cards are convenient, less dirty than cash, can be saved on your smartphone, and offer far more perks than just paying with plain old dollar bills. 

However, this isn’t to say that credit cards are perfect, as only paying with credit could lead you into debt. It’s too easy to overspend with credit cards and only think about paying things off in the future, boosted by the idea that rewards programs are more extensive than ever. 

Cash Use Is Down

According to the Federal Reserve Bank of Boston, cash use is way down, to the tune of only being used as much as 20% of the time today. This number was 31% in 2016, and then the pandemic happened, which accelerated the use of credit cards as consumers could not leave their homes. Online shopping saw a significant activity boost, and this momentum hasn’t stopped. 

Credit Cards Offer Better Security

There is no question that one of the biggest reasons to carry credit cards is better security. When you drop cash on the ground and walk away, it’s gone forever. On top of that, the U.S. handles around $30 million of damaged currency every year, as bills can break and rip. Lastly, cash isn’t as safe as it’s ripe for criminal activity like pickpocketing. 

On the other hand, credit cards offer plenty of purchase and fraud protection. Unlike cash, if someone steals your credit card and uses it, banks will ensure you don’t owe anything and even give you money back before making a payment. 

Purchase Protection 

Another major benefit of using credit cards is purchase protection. If you purchase online and don’t receive the order, federal law has wide-ranging policies that allow you to go to your credit card company and ask for a reverse charge. 

In addition, many credit cards offer purchase protection, like extending a warranty on a product for an additional year. Yet another perk could include price matching if something you purchase goes on sale up to 90 days after you buy it. The credit card company will issue a refund to help match the new price, a major perk for consumers. 

Contactless Payments

My favorite reason for using credit cards is the rise of contactless payments. Better known to most people as Apple or Google Pay, paying for Dunkin Donuts with your smartphone or at a grocery store like Publix is extremely simple. 

Apple even enables Apple Pay directly on your computer through your digital wallet while giving you all the protection you regularly find with credit cards. Between 2022 and 2024, Apple Pay grew by 41%, and after 10 years of use, it currently accounts for 5.6% of all retail sales. 

Rewards, Rewards, Rewards 

If there is any reason people love to use different credit cards, it’s all about the perks. Reward programs are how credit cards differentiate themselves these days. This might be in the form of using miles accrued over time from purchases to book a trip. Alternatively, it might be a cash-back card where you can earn 1-2% on your yearly purchases, adding up to hundreds of dollars in rewards annually. There are almost zero programs that reward cash purchases, which makes credit card use all the more enticing. 

Be Careful Not to Overspend

If there is a downside to credit card use, it’s almost too easy to spend. You know exactly how much you can pay with cash, as it’s in your hand. With a credit card, it’s in the cloud, so overspending is a real problem and can quickly lead to debt. If you’re not careful, you can carry a balance and accrue interest, significantly impacting how much you owe the credit card company over time. 

The best thing you can do is to stick to a budget and make sure you pay your bill on time, in full, every time. This will take some self-control, but if you only buy things you can afford with cash now, you can pay everything off monthly while still receiving the benefits from various rewards programs.