Pros and cons of cash

  • Easier to budget

  • Safer from fraud

  • Accepted in most places

  • Free to use

  • At risk from theft

  • Less convenient

  • Can be unhygienic

  • No rewards for spending

Advantages of using cash

It may be less common to spend cash, especially for expensive purchases, but there are still advantages to having coins and notes in your wallet:

  • Easier to budget: If you like to keep a close eye on what you spend, using cash can help. Limiting yourself to what's in your wallet can stop you overspending.

  • Safer from fraud: Using cash means you'll be less exposed to the risk of your debit or credit card details falling into the wrong hands.

  • Widely accepted: Cash is still accepted in most shops, and some facilities like vending machines or car parking meters still only accept cash.

  • Free to use: Unlike many cards, you'll never be charged interest for using cash or have annual fees to pay. Just remember not to withdraw cash using a credit card.

Disadvantages of using cash

Now there are more ways than ever to pay for your purchases, there are several reasons cash might not be the best option:

  • At risk from theft: If you do all your shopping with cash, you'll need to carry a lot around with you. This means you'll be out of pocket if you cash is lost or stolen.

  • Less convenient: Contactless payments have made using your card easier than cash in some situations, for example using public transport.

  • Can be unhygienic: We've found that cash is a breeding ground for bacteria, including two superbugs that pose the greatest threat to human health.

  • No rewards for spending: Unlike certain credit cards, you can't earn things like rewards, airmiles or cashback when you spend using cash.

What are the alternatives?

Debit cards

Using your debit card is the most popular payment method in the UK*.

When you pay with your debit card, the money is taken directly from your current account.

There a several ways you can use your debit card and current account to spend, including:

Most debit cards now offer contactless payments, which make spending small amounts on card much faster.

Your debit card payments are also protected under the Chargeback scheme. This means you could claim for a refund if there's a problem with a purchase made using your debit card.

You shouldn't be charged for using your debit card unless you go into your overdraft, however some current accounts charge a monthly or annual fee.

* In 2017, UK consumers made 13.2 billion debit card payments compared to 13.1 billion cash payments - UK Finance.

Credit cards

Credit cards work in the same way as a debit card, however you borrow the money you spend, rather than it being taken straight from your account. Find out how credit cards work here.

Credit cards can be a risky way to spend because overspending could lead to debt, and you may be charged interest on your card balance.

However, if you can pay off your balance each month you won't be charged interest and you might be able to earn rewards each time you spend.

Credit card purchases also come with section 75 protection, which means you could get your money back if something goes wrong.

Prepaid cards

You can use a prepaid card in shops in the same way as a debit and credit card, but you have to load money onto it first.

You can only spend the money you've loaded onto the card, so there is no way to overspend and get into debt.

Prepaid cards can therefore help you budget what you spend, and you won't need to pass a credit check when you apply.

However, prepaid cards usually come with fees, and they aren't accepted for some transactions, for example anything that has to be pre-authorised like paying for petrol at the pump. Here's more on how prepaid cards work.

Smart phone payment apps

If you have a smartphone, you can use an app like Apple pay or Google pay that let you use your phone like a debit card.

All you do is hold your phone over the payment terminal in the same way you would with your card when using contactless.

You can add all your accounts including loyalty cards, PayPal and gift cards. You can also use the apps to transfer money to friends and family, and buy things online.

Should you ditch cash?

With so many different options available, think about how you spend and where you shop to work out which is best for you.

For example, if you make a lot of expensive purchases the added protection of using a credit card might be a good option.

However, to make sure you're prepared for any situation, it's a good idea to have both cash and cards in your wallet so you don't get caught out.