We are all familiar with the convenience of credit and debit cards, and there’s no denying that they’re the preferred method of payment for many transactions. But sometimes good old hard currency is preferable. (Although maybe not pennies.) Here are four situations in which greenbacks are a better choice than plastic.
1. When you’re trying to stick to a budget. There are a slew of studies out there that compared cash and card spending behavior, and they all came to the same conclusion: you spend more with plastic. Part of the reason behind this is the disassociation factor: you don’t feel as if you’re actually parting with money when you swipe your card at a terminal, especially if you don’t have to face the bill for a month.
Paying cash is the equivalent of a dieter’s keeping a food diary: it forces you to hold yourself accountable for what you buy over the course of a day. This is especially valid when it comes to small purchases, as the few bucks here and there on lunch, coffee and incidental purchases really add up. Using cash, it’s easy to see how quickly they empty your wallet.
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2. When you’re shopping at a mom-and-pop store or a farmers’ market. More Americans are taking pains to eat and shop locally these days. Often that impulse is driven by a desire to help out the little guy rather than funnel spending dollars to the big-box chain stores. It’s a commendable sentiment, and one that small-business owners and farmers certainly appreciate. But when you hand over your credit or debit card, you’re undoing some of that good intention.
We’ve written at length about interchange fees, those obscure charges banks levy on merchants who accept plastic. Here’s the short version of why they matter in this case: paying with plastic sends as much as 3% of your total purchase price to the banks instead of to your local dog groomer or florist’s bottom line.
3. When you’re at a flea market or craft show. Yes, more vendors these days have credit-card readers like Square, but there are arguments to make for cash. First, there’s the point we made above about interchange fees eating into the profit these small-business owners earn from their sales. Second, it’s much easier to bargain if you have a handful of bills rather than a card. These venues are practically made for haggling (see a list of other places you should negotiate prices here), and as the saying goes, money talks.
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4. When you’re buying something you might have to return. Store return policies vary widely, so it’s advisable to check before purchasing an item you might return. (And by “check,” we mean going online or to the customer-service desk to read the store’s written policy, not asking a cashier who might be misinformed.) Provided you have your original receipt, many retailers will issue you a refund in the same format in which you paid. If you paid with a credit or debit card, this could mean waiting a few days for the transaction to clear. A cash refund, on the other hand, puts that money back into your pocket immediately.
5. When you’re leaving a tip at a restaurant. This is an instance in which paying cash is primarily for the benefit of the recipient, but if you plan to revisit a restaurant in the future, your consideration may translate to better service next time. Depending on the restaurant’s policies, there could be a number of reasons cash is a better choice. The biggest perk a server gets with a cash tip is leaving at the end of the shift with cash in hand. Some restaurants distribute tips left via credit or debit cards weekly; for people living paycheck to paycheck, getting that 15% of customer checks in cash every day can make a difference. According to CreditCards.com, some eateries will even ding waitstaff for the interchange fee on the tip portion of the bill, which can cut up to 3% off the total.
Some restaurants require all serving staff to pool tips, so if you got knockout service and want to make sure the person who did the work gets the reward, pay cash. There is a moral ambiguity here, in that the server would be breaking the rules if he or she just pocketed the tip. There’s also the unfortunate possibility that leaving cash tips helps waitstaff avoid paying taxes on the money by not declaring it, but the IRS has been cracking down on this practice in recent years, so it’s less of a concern than it used to be.