Practically almost every business takes cash or credit. I refer cash as physical cash money or accessing directly from your bank account like your debit card or giving your account information. I like using credit whenever I can because of the points benefits whether it’s for travel points or cash back points. However, I usually don’t use my credit card when I see the disclaimer that I’ll be charged a transaction fee. I frequently contemplate when it’s best to use cash or credit.

Businesses have to pay a small transaction fee every time someone uses a credit card. That fee is typically eaten by the business and not passed onto the consumer except for a few organizations that I’ve experienced. My utility companies either don’t take credit cards and/or will pass on the transaction fee to me if they do take credit cards. After you file your personal income tax return and if you owe the federal government money, a couple of options to pay is by cash or credit card. If you pay cash, there’s no additional fees. If you pay by credit card, there is a fee and you have to pay it.

When is it appropriate to pay with credit cards and pay the additional transaction fee? Like I said, typically I don’t but there are times I do. Let’s say you’re paying a $1000 bill and there’s a 3% transaction fee if using a credit card which means you’ll pay an additional $30. Let’s also say that your credit card gives you 1 point for every $1 you charge. The $1000 bill will give you 1000 points and my cash back credit cards will give me $.01 (one cent) per point. So, 1000 points will give me $10. I’m paying $30 to get $10, a 66% loss…not a wise decision.

There are rare occasions where I will pay the transaction fee.

Trying to meet credit card promotion spending

When I open a new credit card, I open ones that have a promotional value whether it’s for travel points, cash back, or other. These cards will require you to spend a certain amount in a certain timeframe such as spend $3000 within the first 3 months of opening the card. I’ve had a credit card where I needed to spend $5000 in the first 3 months. If the promotional value exceeds the amount of the transaction fee and I’ll pay the transaction fee. For example, if you were to get 100,000 hotel points to spend $3000 and the transaction fee for a $3000 purchase is $90, I’ll gladly use my credit card and pay the transaction fee because the promotional value exceeds the $90 in this example.

Trying to achieve credit card bonuses

Some credit cards will give you a bonus if you spend a certain amount each year such as a free hotel night if you have a hotel credit card. I have a credit card that will give me a free night if I spend $15,000 in a year. In addition, I’ll accumulate 15,000 points. I calculated that this bonus will either be a break even situation or a benefit depending on the hotels I stay at.

When you don’t feel comfortable giving out bank account information

There are times where I don’t feel comfortable giving out bank account information for a direct debit transaction. My cell phone provider, my home internet provider, utility company all take bank account information and can directly withdraw from your bank account which I’m comfortable with. There have been situations where my bank account information is requested which I wasn’t comfortable with and I gave my credit card instead if they took credit cards.

Like I said, I rarely will pay the transaction fee unless it’s one of these three situations. You have to determine whether paying with credit or cash is more beneficial to you and if that transaction fee is worth spending on. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.

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