4 reasons to give up cash and start using credit cards

With the advent of credit and debit cards, online payment systems, peer-to-peer networks, smartphone apps, and more, getting rid of cash has never been easier. And besides convenience, there are many benefits to using credit cards.

Unlike cash, credit cards give you more consumer protection, perks that reward your spending with free airline flights, hotel rooms and even cash back, and make it easier to keep track of your purchases.

Here are four reasons to ditch cash and start using credit cards:

1. Safety

Money is easy to lose. Whether that wad of $20 bills fell off the street, leaked into the laundry in your jeans, or got burned in a house fire, once it’s gone, it’s gone forever. The US Treasury handles more than $30 million worth of damaged and mutilated currency every year.

“It’s not safe to carry a lot of cash around,” says Beverly Harzog, credit card expert and author of The Debt Escape Plan.

Credit cards are not only more resilient, but they also provide more protection than cash substitutes such as debit and prepaid cards and checks because money is not withdrawn from your account immediately.

“If someone hacks this [debit card or checking] account, you could lose everything in that account,” Harzog warns. “Many banks will cover this, but you may be left without this money for a week or two. If you live paycheck to paycheck, you may run into late payments and other problems.”

2. Consumer protection

When a seller or online store has your money, the only recourse if you are unhappy is to convince the seller that you deserve a refund or exchange, or take lengthy legal action. But with credit cards, you have a lot of options, says Robin Sachs Frankel, a personal finance expert.

In accordance with federal law and card issuers’ dispute resolution policies, credit card companies may cancel a payment if the seller cannot deliver your order, sends unordered items, delivers a damaged item, or makes unauthorized payments to you.

Many card issuers go even further by offering purchase protection, including extended warranties and replacement insurance in case purchases are lost, stolen or damaged. There’s also price protection that refunds the difference if something you buy goes on sale after 60-90 days, and return protection if you’re unhappy with your purchase.

Other protection benefits include receiving free credit ratings from most major issuers. In addition, Discover offers free identity theft protection that tracks your social security number and alerts you if someone is trying to open credit accounts in your name.

3. Perks and bonuses

Beyond security, where credit cards really beat cash is benefits and rewards, from free hotel stays and flights to cash back, notes loan officer John Ulzheimer, formerly of FICO and Equifax.

“Rewards are definitely an advantage of using plastic instead of cash and there are so many different programs out there that don’t charge fees. Except for the very rare occasions when the retailer will offer you a slightly lower price if you pay with cash, they offer no reward,” he says.

Other perks may include exclusive offers on entertainment deals and entertainment, hotel room upgrades, concierge services, and access to airport lounges, to name but a few.

Passengers using the Delta SkyMiles® Gold American Express Card receive one free piece of checked baggage per flight, the Chase Sapphire Reserve card offers travel cancellation and delay insurance, travel accident insurance and baggage loss protection, and your card can even give you free access to TSA. PreCheck, Global Entry or Clear to speed you through the security lines.

“As more and more credit cards compete for your dollar, the perks are getting better,” says Frankel.

“Rewards are definitely an advantage of using plastic instead of cash and there are so many different programs out there that don’t charge fees. Except for the very rare occasions when a retailer will offer you a slightly lower price if you pay with cash, they don’t offer any rewards.”

4. Manage your expenses

The key to making credit card benefits work for you is to avoid balance. Otherwise, you may end up paying more interest and getting into so much debt that any reward won’t be worth it.

“If you can control yourself and stick to a budget, you can definitely profit from using bonus cards,” says Harzog. “But you must…pay the bill on time and in full.

She suggests checking your accounts at least once a week to make sure you haven’t forgotten any charges, especially if more than one person is using the account. Other strategies include paying your card bills two or three times a month to keep your credit utilization rate low, and using your card issuer’s mobile app to pay for each purchase as you go.

If you want to create a budget, maps are fine too. If you don’t like carrying around a wallet full of receipts, cash is also hard to trace. However, credit cards make it easy to track where and when each purchase was made.

You can also link credit cards to popular online tools like Mint and You Need A Budget to track and classify your expenses and budget—without the hassle of manually keeping track of every penny.

bottom line

In many ways, cash is no longer king. Credit cards offer convenience, security, and a range of benefits that make them the smart choice for your wallet.