In the era of credit card loyalty rewards, tap-and-go payments and “Buy now, pay later” schemesThe idea of using cash to make purchases may be a quaint fad of the past. Yet paying cash for certain goods and services can actually save you money, personal money experts say
With the total credit card balance reaching the US $1.1 trillion in 2024Now may be a good time for consumers to pull out their greenbacks or their debit cards, especially when it comes to the following expenses.
Gas
Is it cheaper to buy gas when you pay with cash versus a credit card? At many stations, yes. Known as “dual pricing,” discounts on gas paid for in cash typically range from 5 cents to 10 cents per gallon, According to Up to NerdWallet, however, discounts may be reached 40 cents At some stations.
Reason for dual pricing: Credit card fees. Gas stations, more than 60% of which is Independently owned, pay a fee to the credit card issuer on every transaction that uses plastic, whether it’s filling up a tank or buying a bag of chips.
from offset That card processing fee, some stations offer customers a lower price for cash payments. Legal in all 50 StatesCash discounts are usually clearly displayed on the price marquee at gas stations.
Notably, whether debit card payments are treated as cash depends on the station. Some stations offer discounts only when you pay with real bills and coins. In that case, you have to pay the clerk inside the station before the pump Active.
If you’re serious about saving money, in the meantime, stay away from impulse buys like food and drink. A single hot dog can eat up your cash discount.
A word of warning: When using a debit card at the pump, “Skimmers,” or fraudsters attach card readers to steal your debit or credit card information when you swipe (see here (For FBI tips on how to protect your debit card.)
groceries
Between grocery shopping and restaurants, there are Americans Most of their income is spent on food They have in 30 years. Making matters worse, shoppers are on the rise Rely on credit cards to complete. According to a May report, six in 10 adults, or 60%, used a credit card for grocery purchases in 2023. report by urban organization.
Conversely, using cash to buy groceries is a good way to curb overspending in the supermarket aisles. That’s because limiting grocery purchases to a set amount of cash forces you to stay on budget and make more practical decisions, like choosing a large container of whole oats over small flavored packets. And by buying with cash, you’ll give your credit card a break, giving you a fresh start Pay the outstanding balance.
Using cash at supermarkets can result in monthly savings as high as 25%, According to to Business Insider. According to Forbes, the savings can be even higher, which found That consumers are twice as likely to spend when using a credit card instead of cash.
College Tuition
Given that now the average tuition for private US colleges Top $40,000 a yearIt’s no wonder some parents with kids in school are forced to turn to credit cards, while others see value in racking up points or miles.
But using plastic to pay for tuition comes with a number of caveats that experts say outweigh any potential benefits. First and foremost, according to GoBanking RatesA growing number of colleges and universities that accept credit card payments for tuition, often including a 2% to 3% surcharge that can negate any benefits gained from rewards, return an average of 2% on non-food purchases.
The biggest reason not to pay for college with a credit card is also the most obvious: interest on missed payments. With annual percentage rates currently a A record-high average of 22.76%It’s easy to see how quickly your balance can explode if you miss any payments on large tuition charges.
For this reason alone, most experts strongly advise that people avoid using credit cards to pay for college.
“I think even going for a zero percent promotional rate is very risky because it can be a big charge, and interest rates will skyrocket at the end of the term,” said Ted Rossman, senior credit card industry analyst at Bankrate.com. In recent report On a personal finance site.
Ann Marie d. Lee is an editor for CBS MoneyWatch. She writes about topics including personal finance, workplace, travel and social media.
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