4 Reasons You Should Pay for Small Purchases With Credit Cards

Americans use credit cards a lot more for big purchases than small ones. Here's what you miss when you use cash, checks or debit cards.

4 Reasons You Should Pay for Small Purchases With Credit Cards Photo by Africa Studio / Shutterstock.com

More folks are pulling out a credit card to pay for small purchases these days, a recent CreditCards.com survey shows.

While cash and debit cards remain the most common payment methods for small purchases, consumers are using them less this year — and using credit more — compared with last year.

Here’s what CreditCards.com found when it polled 674 holders of credit cards last month about their preferred payment method for in-person purchases of $5 or less:

  • Credit cards: 17 percent (up from 11 percent since last year)
  • Cash: 55 percent (down by 3 percent)
  • Debit cards: 24 percent (down by 3 percent)

Credit is used much more commonly for large purchases, with the survey finding it the preferred payment method for single purchases of $500 or more:

  • Credit cards: 57 percent
  • Cash, debit cards and checks: 42 percent

Using credit cards offers multiple advantages over cash and cash equivalents, including rewards programs and protections. 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: CreditCards.com says rewards and cash-back cards “can deliver huge savings on almost any purchase.” The website also notes that these rewards 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: CreditCards.com reports that 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.
  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.”

What’s your preferred payment method for small purchases? Let us know why — leave a comment below or on Facebook.

Karla Bowsher
Karla Bowsher
I’m a freelance journalist and former newspaper reporter who has covered both personal and public finance. I've worked for a top 50 major metro daily and a community newspaper as well as ... More

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