Choosing the best way to pay for something — credit or cash — can make a real dollar difference for you. So knowing when to do which is key. Personal finance experts say it’s especially smart to avoid using cash for these five types of purchases:
Electronics and Other Products with Warranties
Products or Services that Haven’t Been Received
The Advantages of Using Plastic
Dan Andrews, a certified financial planner in Fort Collins, Colorado, warns that cash and, more recently, prepaid cards are the preferred currency of scam artists. And once you hand over cash or funds from a prepaid card to a scammer, it’s likely lost forever.
Another advantage of using plastic: Your credit card company will help you if you don’t get what you paid for, says Morris Armstrong of Armstrong Financial Strategies in Cheshire, Connecticut. “The beauty of credit is, you always have recourse,” he says. If you pay with cash, your best shot at recovering your money when there’s a disagreement is in small claims court, Armstrong says.
Armstrong and Andrews say that keeping your tax-deductible expenses on a credit card can be a big help at tax time, too.
Of course, cash is often the only option when you’re buying something from a garage sale or on Craigslist. So the price of a vacuum cleaner found at a moving sale may well be worth the risk of paying cash.
Cash also can be an easy way to stick to a budget, if you give yourself a set allowance each week. But if you pay off your credit bills each month, using a credit card could help you earn rewards and protect your purchases.
Usually, the choice is fairly straightforward, says Megan McCoy, a financial therapist. “Use a credit card if you can pay off your balance. Don’t do it if you can’t.” The potential rewards for using a card won’t outweigh what you’ll pay in interest if you carry a balance. And if you normally carry a balance, McCoy says, you may want to take a look at building a more realistic budget.
The article 5 Times to Stash Your Cash and Pay With Plastic originally appeared on NerdWallet.