Cash vs. Debit Cards

Recently, CNN Money declared that “Cash is King for the Holidays“. According to a new survey done by the National Retail Federation, one out of four consumers intend to pay for their holiday gifts using cash, that’s 9.1% increase from last year. Another 42.5% of Americans intend to use their debit or check cards for their holiday shopping. With credit card usage falling and consumers looking to spend more within their means, the question might come up, “Which is better … debit cards or cash?”

Many financial gurus promote a “cash only” mantra, but there’s no “one-size fits all” to budgeting. Some consumers prefer cash, while others prefer using debit cards. Here are some factors to consider when you’re answering this question for yourself:


Paying by cash requires you to plan ahead and pull the money out of your bank account. ATMs have made purchasing with cash easier, but there’s no guarantee that the ATM at your local mall is run by the bank that you use. Many banks charge fees if you use their ATM and are not a member of their bank. Debit cards are always available. Whenever you’re out and about, if you see a good sale, you don’t have to worry about where to find the nearest ATM. You just pull out your card and swipe. However, because your debit card is always available, you’re more likely to impulse buy than if you pay with cash.


Keeping to a budget means keeping a detailed record of what you spend and doing regular audits to make sure that your budget is matching your lifestyle. When you pay with cash, the only record of the transaction is a receipt. It can become cumbersome to keep all your receipts and have to shift through them at the end of the month. Debit cards are typically tied to an online bank account, and you can usually download those statements to a spreadsheet where you can further manage the data for budgeting or tax purposes.

Online Shopping

According to the National Retail Federation, four out of ten Americans will be doing their holiday shopping online. If you stick to your “cash only” mantra, you won’t be able to take advantage of this medium. You’ll have to go to the store and deal with all the crowds. Online retailers accept most debit cards. From the convenience of your home, you’re able to comparison shop without being pressured by sales people. You can search for and use online coupons for additional savings. During the holiday season, many online retailers will offer “free shipping” to be competitive against the brick-and-mortar stores.


You never have to worry about overspending with cash. Once your money is gone, you have nothing more to spend. With a debit card, it’s easy to lose track of your spending because you’re not physically handing over your money, you’re just swiping your card. Over the last few years, banks have gotten better about reporting your debit card purchases online, but there can still be a lag time between when you swipe the card and when it’s posted online. One mistake or forgotten purchase can lead to a budgeting crisis.

Potential Fees

With cash, typically the only fees you have to worry about are at the ATM. If you plan your holiday shopping ahead of time and stick to your budget, you can make sure to avoid those fees. In fact, some places, such as gas stations, will offer you a discount if you pay in cash because you’re saving them the transaction fee that they would otherwise have to pay if you used your debit card. Debit cards are tied directly to your bank account; if you’re not keeping an eye on your purchases, you can drain your bank account and incur non-sufficient funds (NSF) fees. If you’re utilizing overdraft protection, you can avoid potential NSF fees, but the banks usually charge a minor fee to move money from your savings to your checking account.


Paying with cash can be more risky than a debit card. If you lose your wallet or your cash is stolen, it’s gone and there’s no way to recover your loss. With a debit card, you usually have a protection program that will help you recover lost funds and get you a new card within a timely manner. Also, banks monitor debit card purchases and will shut down a debit card that’s showing unusual activity if they can’t reach the account holder.

Whatever method you choose to use this holiday season, make sure that it works for you. If you’re one of the 28.3% of holiday shoppers that are planning to use your credit cards, take a step back and think, “Do I really need more debt?”

This is a guest post from Kathryn Katz. Kathryn is a working mom, internet marketer and professional copywriter. Kathryn is a Certified Personal Finance Counselor and works for Consolidated Credit Counseling Services. The non-profit credit counseling agency offers a Holiday Survival Guide for holiday shoppers.

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4 Responses to “Cash vs. Debit Cards”

  1. Wojciech Kulicki |  Dec 07, 2009 at 12:33 pm

    I’m a big fan of using cash for a lot of purchases, but as you point out–online shopping is impossible with cash, so we’re automatically going to use a card. I would go one step further and say that with online shopping specifically, I would use a credit card because of the protection it provides. You’re not “there” to see the product in person, so you want to make sure you’re getting what you paid for.

    That is, if you can trust yourself to use credit responsibly…

  2. Edwin |  Dec 07, 2009 at 7:09 pm

    Great overview of how cash and debit differ, particularly for the holiday season. Thanks!

  3. Sun |  Dec 10, 2009 at 12:40 pm

    I am a credit card user. Whenever possible, I use credit cards to make purchases, even it’s only a few dollars. I have a check card, which is the same as a debit card, but I only used it twice for as long as I can remember when I needed to purchase a money order from the post office.

  4. Calculate Credit Card Interest |  Nov 30, 2010 at 3:35 am

    Interesting, this holiday season (2010) is no different. A majority of the people will be using debit cards over credit cards again. In fact, the rate of credit card usage hasn’t been this low since 2002.

    I understand that debit cards are great when you’re under a tight budget, but I still recommend people use credit cards over debits whenever possible. Mainly for security and how it’s better to spread your credit card number around than your debit.