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For small purchases, cash remains king, a recent survey shows. But paying with dollars and cents can be a mistake in some situations.

The survey found that 45 percent of shoppers eschew their rewards cards in favor of using cash to pay for items under $10. That means these folks are passing on opportunities to rack up rewards on their credit cards.

Using credit cards offers multiple advantages over cash and cash equivalents — including consumer protections — that stretch beyond rewards. But whether you should pay with credit or cash chiefly depends on your financial situation. So let’s take a closer look at which payment methods best suit which types of consumers.

When cash is better

Carrying debt on credit cards is costly — you’ll pay interest on that debt for as long as you carry it. So if you’re trying to get out of debt, it’s generally best to pay with cash or cash equivalents such as debit cards and checks. Putting even small purchases on a credit card will add to your debt — and interest payments.

If you carry credit card debt but cash is not an option, use a credit card that has the lowest interest rate you can get rather than the best rewards you can find.

You can use Money Talks News’ credit card search tool to find the perfect credit card for you. Filter the results by “Competitive APR” to find cards with low interest rates.

For more exceptions, check out “10 Purchases You Shouldn’t Make With a Credit Card.”

4 reasons credit is better

If you pay off your credit card bill in full each month, you don’t pay interest. That way, it’s generally smart to take advantage of credit’s benefits — which you’ll reap even when making small purchases.

The benefits of paying with a credit card include:

  1. Rewards : Rewards — ranging from cash back to airline miles — are as plentiful as ever. To see for yourself, check out Money Talks News’ credit card search tool and filter the search results by “Reward,” “Travel” or “Cash Back.”
  2. Protections : Many credit cards also offer purchase protections. For example, some enable you to get your money back for a purchase even when the store won’t accept the return. Additionally, credit cards generally offer better fraud protection than debit cards, which we explain in “7 Ways to Guard Your Wallet — and Identity — When Shopping Online.”
  3. Expense tracking : Confession: I’m not big on budgeting — but I’m huge on tracking expenses. I want to know what’s going where and to be alerted if spending gets out of hand. Expense-tracking programs make this easy, especially when you don’t use cash. For me, tracking cash purchases means rummaging through my spouse’s pants pockets and car consoles for receipts because there is no electronic record of cash purchases. If you would like to try one of these programs, consider using our partner, You Need a Budget.
  4. Credit : Using credit cards responsibly helps you build good credit. For more help with that, check out “Boost Your Credit Score Fast With These 7 Moves.”


This article originally published on by Karla Bowsher

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