The Business Of Business: Cash, credit or debit: Which is best?

Canadians purchase over $360 billion worth of goods and services with their credit and debit cards every year, and the numbers are only climbing.

While tectonic shifts in the online delivery of goods and services explain a good portion of the shift to plastic, are Canadians better off using credit, debit or cash for off-line purchases?

In our opinion, there’s no doubt credit cards are the best option for most purchases. The only time we can see cash having a benefit is if you’re looking for your transaction to remain anonymous, or if the retailer is offering a discount for using cash. Other than that, cards are king. Here’s why:

1. Rewards: With some credit cards offering up to 5% cash back on gas and groceries, why  would you use cash? If you have to make the purchase anyways, you might as well get rewarded for it.

There has been research that has shown that people tend to spend more when using credit cards, all but wiping out any rewards earnings. That may be true for some, but whether you’re using credit or debit, it’s hard to overspend on gas at the pump, or on your telecom bill.

2. Safety & Security: It’s nice to know that if you bring your credit card with you on vacation, you don’t have to worry about the risks of your credit card being stolen. Any fraudulent charges will be paid by your bank and your card will be replaced within days.

Of course, if you bring cash with you, if it gets lost or stolen, it’s gone for good. If you get defrauded on your credit card, the money gets taken out of your checking account, and you have to make a claim to have the money refunded to you by your bank. In the meantime, you’re on the hook for the loss.

3. Purchase Protections: Credit cards protect your purchases in ways cash and debit simply don’t. For example, did you know many credit cards will protect your items from damage or theft for 90 days after purchase?

Moreover, many credit cards also offer extended warranty coverage, just for using your credit card to make the purchase. Simply use your card, and you may extend your washing machines warranty from 3 to 4 years.

Lastly, many credit cards offer travel insurance. If you pay for your cruise with your debit card, you either have to buy trip cancellation and travel medical insurance separately, or risk it, and expose yourself to potentially catastrophic costs.

All in all, there are very few reasons one should choose cash or debit over credit. If you’ve had problems managing credit in the past, simply follow the Golden Rule and put your credit card on an automatic monthly payment plan – you’ll never be late and never carry a balance.

Marc Felgar is a credit card expert & online entrepreneur from Montreal, QC. He is the CEO and founder of, which helps Canadians find the best credit card through online comparison tools, filters, credit card reviews and the latest deals and offers in the marketplace.

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