What Should You Use – Cash or Card?

cash or card what should you use cash or card difference between cash and credit card cash vs debit card cash vs credit card cash vs online payment is cash on delivery good

Living in a Digital World has pushed us more towards using “Plastic Money” than the real one. And most of the online shopping portals discourage us from using the physical currency in many ways. But are these cashless transactions making you CASHLESS? In this article, we are going to answer once and for all, Which is Better and What Should You Use – Cash or Card.

Do you really think that these Big Banks and Businesses are here to give you “FREE” stuff or “Flat 30% Off” or “Flat 50% Off”? Do you really think the air miles or free dinner reservation you are getting for using your credit card is free? If you think that you are not paying for those “free” amenities, then you are very mistaken.

And searching the internet doesn’t help, too. Most of the articles that are available on the internet try to defend Plastic Money, repeating the same old logic that Plastic Money provides “convenience” and it earns “loyalty points” for each transaction. While research shows that in the year 2017, loyalty points worth $100 Billion, was never redeemed.

Does those credit card reward points still look attractive?

We will talk about the cashless form of payments like Credit Card or Digital Payment, but first, let us tackle the easy one – Debit Cards.

Should You Use a Debit Card?

cash or card what should you use cash or card difference between cash and credit card cash vs debit card cash vs credit card cash vs online payment is cash on delivery good

No. Though Plastic Money like the Debit Card serves a very useful purpose in modern-day life, it comes at a huge cost. Research shows that debit card users tend to spend more than physical cash users. So people should refrain from paying using a debit card as much as they can.

According to research, spending physical cash triggers the pain sensors in your brain. So you tend to spend less when you are using REAL PAPER CURRENCY.

As it doesn’t hurt when you swipe your debit card and punch in the PIN to buy unnecessary things, you tend to spend more when you shop using a debit card. Though you are not using someone else’s money and going into debt while using a debit card, still, spending your own hard-earned money for stuff you don’t really need cannot be a good thing.

As Mr. Buffet said –

And the annual maintenance charge you pay for using a debit card is just the cherry on the cake. Most of the debit card user doesn’t even know that they pay a certain amount annually, to the bank from whom they have issued the card.

That is why we will always recommend to our readers to prefer cash over a card, any day of the week. When you use cash for payment, it makes you actually realize how much money you are spending on a certain thing.

Personal Finance is more about mentality and mindset and less about maths. You need to understand that here we are dealing with the behaviour of a human being.

Professor Carey Morewedge is a Professor of Marketing at Boston University. According to research done by him, we humans think of the price in a relative term.

A 70 Rupees sandwich might seem inexpensive in front of a 120 Rupees sandwich. But the same 70 Rupees sandwich might seem expensive in front of 40 Rupees sandwich.

Cost is Relative to us, humans. Not Absolute.

The same thing happens inside our brain when we think of “how much money we have”. We think in relative terms. It is called “Cognitive Availability”. How much money, “we think” we have.

Now, this is where the Debit Card, or any other type of Plastic Money for that matter, tricks your brain.

If you left your home for the day with just 200 to 300 Rupees in your pocket, that 120 Rupees sandwich might seem expensive to you. But if you have a debit card in your pocket, does that 120 Rupees sandwich feels expensive now?

Most probably, No.

It is because, in the first scenario where you left your home with just 200 to 300 Rupees, the resource pool or the “money pool” is limited. But when you have your debit card and if it the start of the month, the resource pool inside your brain is basically the whole month’s salary.

Your brain is thinking in relative term, like –

120 Rupees versus 200 to 300 Rupees, in the first scenario. And if you have your debit card, 120 Rupees versus the whole month’s salary.

Now, which comparison seems expensive to you? And in which case do you think you are going to spend more?

Obviously, the ‘120 Rupees versus 300 Rupees’ scenario would seem expensive to you, while you will spend more when you have your debit card in your pocket.

That is why you should always use cash whenever you can. And this is the shorter version of the above-mentioned scenario.

The only time you would find a debit card useful is when you use it for the purpose it was intended for – Taking out cash from an ATM. That is why it is called “ATM-cum-Debit Card”.

Why You Should Stay Away from Digital Payment?

Digital Payment is fast, effortless and simple, and it is also the worst among all kind of payment methods.

As the saying goes in the business world – “Cash is King!” And if you cannot see or feel it flow out of your pocket, then your brains tricks you into thinking that it didn’t happen. This is what happens when you pay using any Digital Payment method.

One of the best examples of such a scenario is the monthly recurring subscriptions.

Many of you have recurring magazine subscription which you never read or an OTT subscription which you never watch. But you have never thought of closing those subscriptions. It is because the subscription fee is deducted via online mode and it happens without you noticing. And that is why you never bothered to stop the subscription.

If you do your grocery shopping online, then do you remember, what was the price you paid for a jar of jam last time? How much you paid for the bag of flour? Most of you cannot remember.

Now think of paying 5000 rupees to a shopkeeper in hard cash. You would feel it, and if it is your hard-earned money, it will also hurt. You will remember the price of each item for a very long time.

Now try to remember the last time you paid 5000 rupees to an online shopping portal. Most of the people will not be able to remember. And if your cart had multiple items while you were checking out, you cannot price out each of the items from the top of your head.

Now everything is not dark and gloomy here. In some cases, Digital Payment might provide you with a better value than cash. For instance, during the sales day hosted by different online shopping portals.

On those sales day, online shopping websites provide major discounts on different high-value items. Such cases justify online payments. Or regular monthly bills like your electricity bill or gas bill.

Should You Use a Credit Card?

cash or card what should you use cash or card difference between cash and credit card cash vs debit card cash vs credit card cash vs online payment is cash on delivery good

No. You should refrain from using credit cards. Because not only credit cards tricks your brain into thinking that you have unlimited money to spend, it also adds the time dimension into the mix, where you think you don’t have to pay now, you can pay later. You are likely to spend 83% more when you are using a credit card.

We have discussed above that people spend more when they use plastic money like a debit card. The same holds true in the case of a credit card.

But in the case of credit card, the effect is much more amplified. When you are using a credit card, your brain thinks that the resource pool is infinite and not limited, like in the case of a debit card.

Let us discuss a bit about the time dimension that credit card brings into the whole equation.

When you are using a debit card, somewhere in your mind, you know that the money will be deducted at the very moment you swipe your card. But when you are using a credit card, your brain knows very well that you don’t have to pay the sum you owe at that very moment.

By using a credit card you are basically moving your payment to the future. You have to pay for the product or service you used, in the future. This also brings the “pain of payment” down which makes us spend more.

Credit card also makes your brain think that someone else is paying for you. And who doesn’t like enjoying life on someone else’s money.

Let us bring back the “sandwich scenario” we discussed above.

Does the 120 Rupees sandwich seem expensive when you have a credit card with a spending limit of 10,000 Rupees?

No. You will not think for a second before ordering your sandwich.

(10,000 Rupees spending limit is on the lower side. The average credit card limit is around $22,751 or Rs. 16,66,886/-, if a US dollar is 73 Rupees.)

By using a credit card you have made it easy for your brain to convince you to spend the money.

Why You Should Not Use a Credit Card?

  1. Your brain thinks that the money you are spending is getting deducted from a source which infinite.
  2. Your brain doesn’t know what the physical amount feels like, so it easy for you to think the amount is not big. It doesn’t feel the pain of payment it would have felt if the amount was paid in cash.
  3. As a credit card doesn’t deduct the money from your account, the moment you swipe it, your brain thinks that you are spending someone else’s money, so it doesn’t stop you from spending more.
  4. By using a credit card, you are just pushing your payment into the future. And we human beings as species are not good at judging our future. By pushing the payment in the future, indirectly, you are saying to yourself that “I value today’s comfort more than my future’s security”.

One of the main difference between cash and credit card is that your brain does not perceive credit card as real money, and that is why credit card encourages impulse buying.

What Should You Use – Cash or Card?

As plastic money like a debit card or a credit card encourages impulse buying, you should try to use cash as much as possible. By using a debit card or a credit card, you are making your brain numb to the pain of payment. Cards also inflate the resource pool perceived by your brain, which makes you spend more. Multiple research has proved that using cash makes you spend less.

This debate about which is better for you, cash or card, will go on forever. Though the issue isn’t subjective and can be properly answered using logic, we have to remember, here we are dealing with human behaviour. You cannot have a logical discussion with someone who values “reward points” more than actual cash.

Inverse also has a very well written article regarding the same matter.

So to conclude the whole article, we would say it is beneficial for you and your financial health that you make most of your payment using cash. Cash makes you spend less money.

If you liked the article, show us some love using the Upvote button placed below. Also, do share with your friends as this article will definitely make them think more about their financial decisions.

After reading this whole “cash or card” article, if you still have any question or query, do ask us in the comment section below. We will definitely try to answer it.

In the end, we will say – Good Luck and Happy Spending. 😊

Disclaimer: The views, investment tips, presumptions, and calculations expressed on are not of the website or its management. This article is for Educational Purpose only. advises users to check with certified experts before making any financial decisions.

What do you think?

Written by Sayantan Chakraborty

I have been investing in the Indian stock market for more than 11 years. I have invested in the Indian Stock Market via Mutual Funds, ETFs, and Direct Stocks. I have seen multiple markets cycle, and from my experience, all I can say is persistence is the key to success in the Indian Stock Market as an investor.
I also love reading financial books and company results and reports.
You can ask me anything on Twitter by clicking on the button below.


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