Laurie Cipriano

KUSA – Cash is king in many ways. You can spend it almost anywhere.

Credit is also widely accepted. However, carrying a balance on your card can get some people into financial trouble.

But you might be surprised to find out that paying cash can also cost you in the end.

“The obvious problem with credit cards is overspending,” said Paul Golden with the National Endowment for Financial Education. “We’ve seen studies that actually show that people will spend 20 percent more if they’re using credit cards over cash.

“They [credit card companies] aggressively market their products,” said Bhaskar Chakravorti, an economist and senior associate dean of International Business and Finance at the Fletcher School at Tufts University. “It’s relatively easy for a consumer to sign up for a credit card. Because you get all these offers in the mail.”

With cash, there are no missed payments to worry about, no fees and no finance charges.

But if you use credit, and have a card that offers cash back, you can essentially lower the price of whatever you are buying from 1 to 5 percent.

“It could make sense to pay for all of your day-to-day spending through your credit card account,” Golden said.

It could make sense – only if the you spend what you know you can pay.

But most people don’t do that. Then the finance charges you get hit with eventually wipe out that cash back.

Then that $50 Christmas gift ends up costing a lot more than $50.

But if you control your spending and pay on-time, in full, every month – the card company is actually paying you to use their card.

“As long as you can do that you should come out on top every time,” Golden said.

Yes, we do realize that retailers must pay credit card companies a percentage of each transaction. But this story is about how you can make your credit cards put more money in your pocket.

Gas, groceries and other spending can add up quickly. In a few years, one credit card paid 9NEWS producer Laurie Cipriano more than $1,000.

That kind of cash back can make some believe credit is the new king.

But sometimes it’s just easy to go up to an ATM, slide in your card and get the cash you need. Then it’s impossible to go over budget.

Cipriano has never used an ATM because she refuses to pay any amount of money – to get access to her own money.

“You’ve got to be careful with ATM usage, particularly when you go to do a withdrawal,” Golden said. “You’ve got to be very mindful of fees.”

“If you go through an out of network ATM, you’re going to be paying a fee to take out your money. Your bank is going to be assessing a charge for that. And then the owner of the ATM that you do the transaction at is going to be assessing a charge to take out that money,” Golden said. “So a lot of people get very frustrated by having to pay fees to get access to their money.”

Of course, there is no ATM fee if you use your bank’s ATM.

But if you’re not near your bank’s ATM, how much will you spend on gas driving around to find an ATM that won’t charge you a fee? You might want to try to calculate that sometime.

Cash from a bank teller is free. Although relying on getting cash from a teller, does require a some planning.

The benefit is that these days, many banks don’t have long lines as more of us bank online. But some may want to use a debit card to access petty cash.

Then there are those who use check-cashing services to convert their paychecks into cash.

“That actually can be very costly. Some places will charge 10 percent of the check amount to actually cash that check and so that can be very expensive,” Golden said.”These are people who can least afford to actually pay those fees. But they are paying them because they don’t have access to traditional banking services, for whatever reason. So there’s a lot of frees that get involved to actually have access to cash.”

Giving up 10 percent of your hard-earned money is like getting a pay cut.

“American households on average pay about 40 billion dollars annually to access cash and use cash,” Chakravorti said. “The biggest source of that cost is the time spent to access cash. And on average an American consumer spends 28 minutes a month in getting cash from an ATM or waiting in line to get a check cashed. The other sources of the cost of cash to the American consumer are ATM fees and account fees.”

It may come as a surprise to some that it costs Americans billions to use cash. But, on the other hand, it comes as no surprise that not retiring your credit card balance every month can add up when those high interest payments accumulate month after month.

So, whether you choose to use cash or credit this holiday season, make sure you start with a good, solid budget.

Then there is the whole security risk associated with using cash.

“By just carrying cash around [is] where it becomes very dangerous,” Golden said. “Credit cards offer security.”

If you lose a wallet full of cash, or if it’s stolen – odds are that you will never see that cash again. It’s gone.

But if you lost a wallet full of credit cards, of if it’s stolen – all you have to do is call your credit card company and tell them your cards have been stolen. The credit card company can handle these types of situations, including canceling your credit cards. Some thieves have can even be caught if they try to use a credit card that has been canceled.

In addition, if you are not satisfied with a product or service, you cannot get your cash back. But if you used a credit card, you can dispute the charge with the card company. The credit card company will open an investigation to determine whether or not you deserve to get your money back. You don’t have that option with cash.