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Paying Cash May Cost You More in the Long Run

Blog-Paying-Cash-May-Cost-You-More-in-the-Long-RunThe NY Times recently featured an article that talked about Americans who are trying to make a conscious effort to use cash instead of plastic.  The catalyst for this paradigm shift isn’t driven by a need to conserve funds or to avoid finance charges as you might immediately suspect.  Some consumers are choosing cash over credit to insulate themselves from the risk of being a cyber-crook’s next victim.  It seems like a sensible solution on paper until you realize that misguided precautions along these lines are eventually going to hurt your credit score if you are too stringent in your new “cash only “payment habits.


  • Credit scoring is really a “use it or lose it” situation.  It’s important to remember to use your credit frequently even if you fully intend to pay off the balance each month.  Many consumers think that a decent credit score is maintained simply by having available credit and they forget about the importance of actually using the accounts with regularity and responsibility to establish an adequate credit history.
  • Before you take drastic steps to change your behavior make some standard inquiries with your card issuer to see what risk, if any, is actually placed upon you when fraudulent activity is detected on your account.  You may discover that all of your business partners observe a “zero liability” policy that protects you from loss in the event an unknown party gains access to your payment card information.
  • “What happens if I notice some suspicious activity on my credit card account”?  This is a great question to ask your card issuer.  Allow them to walk you through the basics of how to report a potentially fraudulent transaction on your account so that you will be prepared for the worst case scenario.
  • Ask your card issuer if they offer special incentives to cardholders who use their payment cards more frequently.  Why not regain your confidence in using your credit cards by also benefiting from programs that you may not have known even existed.


Instead of taking dramatic steps to alter your behavior to opt for cash over credit it might be helpful to just keep an eye on your account activity.


Have you taken any steps to protect your credit cards from data breaches and theft?


John Buzzard is a product manager for FICO® Card Alert Service, and a consumer fraud expert


About John Buzzard

John Buzzard is a product manager for FICO® and a financial writer with expertise in fraud prevention and consumer safety.


  1. You’re also loosing out on a boatload of reward money by using cash. Let’s say you have expenses of $20,000 annually, that’s $400 per year in cash back with a 2% card. Definitely worth the hassle of seeing if a card is compromised.

  2. Much prefer credit over cash.

  3. I will be paying cash for my new car tomorrow. It feels so freeing to actually own it from the beginning. I d not need a high “I love debt” score.

  4. Every bit of responsible financial planning advice on this subject encourages using cash instead of plastic as a tool to limit spending – many further recommend carrying larger bills to limit frivolous spending (not wanting to break a 10 or 20 on a small purchase).

    Paying cash only hurts the credit card companies, who siphon off a bit of every transaction right out of the pockets of the merchants actually providing the goods or services … “parasitic” comes to mind.

    In many years of monitoring my own credit reports I have never seen evidence of long periods of dormancy affecting my credit score, nor is actual usage of my cards disclosed as a factor in my credit score (as is “duration of account” or % utilization).

    Can you provide any concrete guidelines (that would stand up to scrutiny) to back up your incredible claims (“use it or lose it” and “use your credit card frequently”)?? Specific examples would be appreciated, eg: “having no activity on a credit line for xxx months results in xxx point decline”.

    Otherwise the thrust of your post smacks of self-serving shill.toy

  5. The arguments from Dave Ramsey are pretty convincing… How can you reply to that?

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