Why Cash Still Reigns: 5 Transactions You Should Always Use Cash For

Banks issue rewards credit cards for various spending categories, enticing consumers with a plethora of benefits. However, in today’s digital economy, the archaic nature of cash seems to relegate it to obsolescence. When compared to the vast array of benefits associated with credit cards, it is easy to overlook the utility of good old-fashioned paper money, which doesn’t offer similar monetary rewards.

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While it is true that in most cases credit cards are more financially advantageous, there are still specific occasions where using physical currency makes more sense in today’s era of digital and mobile payments like Bitcoin and Venmo. In the majority of cases, it is services, rather than products, where cash is more favorable for the buyer. Here’s an in-depth look at the remaining handful of transactions where using cash as the mode of payment is the prudent choice.

College Tuition

For significant expenses such as college tuition, using a credit card to accrue points, miles, or cash back may seem like an appealing prospect.

However, the bursar’s office is one place where swiping your card is ill-advised.

Approximately 85% of colleges and universities accept credit card payments, albeit with a surcharge of 2% to 3%. At 2.5%, this translates to a $250 fee on a $10,000 tuition bill. Such additional costs swiftly erode any anticipated rewards. Even the most lucrative cash-back cards typically offer only 2% back to cardholders.

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The Doctor’s Office

Most states no longer prohibit merchants from imposing an additional charge on customers who pay with credit cards to offset the fees imposed by credit card processing companies, which can be as high as 4%.

According to Pymnts, small businesses swiftly adopted credit card surcharges, often labeled as “cash discounts,” as soon as states began permitting this practice. With advancements in technology making it easier, the healthcare sector is also now adjusting, with doctors, dentists, hospitals, and other healthcare providers incorporating the cost of credit card usage into their pricing structures.

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Government Offices

Even in states where retailers are prohibited from imposing credit card surcharges, government offices are usually exempt and allowed to pass on the cost of credit card processing to the customer.

As a result, using cash at the local DMV, post office, or when making payments at local courts is typically more cost-effective.

The Gas Station

At gas stations, the price disparity between cash and credit card payments is particularly noticeable. According to The Sun, this can be attributed to the fact that gas stations mostly sell a single product.

Prior to 2013, gas stations offered a cash discount. However, following the permission granted by Visa and Mastercard for merchants to impose fees on credit card payments, most gas stations now prominently display two different prices – a lower cash price and a higher credit card price side by side.

The IRS

If you find yourself owing the IRS during tax season, it is advisable to make direct ACH payments from your checking account. Paying taxes with a card, including debit cards, will result in additional costs, and who in history has ever willingly paid more than they owe to the IRS? Should you decide to pay your taxes using a card, the IRS utilizes three payment processors, each with varying fee structures:

• ACI Payments: $2.20 for debit card transactions, 1.98% with a minimum fee of $2.50 for credit cards
• Pay1040: $2.50 or 1.87% for debit cards, depending on the type, and 1.87% for credit cards with a minimum fee of $2.50
• payUSAtax: $2.20 for debit cards, 1.85% with a minimum fee of $2.69 for credit cards

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This article originally appeared on GOBankingRates.com: Here Are 5 Things You Should Only Pay For in Cash

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