Cash Vs UPI Vs Credit Card: Which One Helps You Save More?

Introduction

Think about your last purchase.

How did you pay for it? Did you pay via cash from your pocket, UPI QR code scanning or swiping your credit card?

A few years back it was common for Indians to carry cash with them, but the scenario has changed considerably today. Thanks to smartphones and technology, cash has been sidelined and UPI has emerged as the new hero. Credit cards on the other hand are gaining ground everyday due to attractive rewards and cashbacks.

But have you ever pondered on how the mode of payment impacts your spending?

Many people believe that cash helps them stay within their budget while others feel that UPI is the easiest option as it takes only a second to make a payment. Some users prefer credit cards as they have attractive rewards, cashbacks, discounts and easy EMI options.

So how different are these payment methods? Which one actually helps you save more?

It’s true that all three payment methods have their pros and cons. It ultimately boils down to personal choice depending upon various factors such as spending pattern, budget and multiple other criteria.

We are going to highlight the differences between cash, UPI and credit card in a simplified manner so that you can understand which payment method is best suited for you.

Cash

Cash is the conventional mode of payment consisting of currencies in the form of notes and coins. Despite the rise in digital wallets and smartphone payments, cash still rules the Indian market as it is the easiest and most reliable mode of payment.

When you pay in cash, the money is physically taken away from you, hence it becomes extremely easy to track your expenses and stay within your budget.

For instance, if you have ₹2000 in your wallet and go to a supermarket to pick up some groceries, you will instinctively keep track of your expenses as you will be physically removing the money from your wallet to pay at the billing counter

Pros of Using Cash

• Easy to manage
• Keeps you within your budget
• Easy to carry anywhere
• Doesn’t require smartphone
• No online security issues

Cons of Using Cash

• Not easy to carry huge amount of cash with you
• Cash cannot be returned once paid
• No cashbacks or rewards on using cash
• Sometimes difficult to pay exact amount

UPI

UPI (Unified Payment Interface) which is one of the most popular payments methods in India. Using UPI you can pay the amount just in fraction of time by scanning the QR code. UPI has penetrated every nook and corner of the country including tea stalls, vegetable vendors, shopping malls, etc.  

It has become the most preferred method of payment due to its extreme ease of use. 

Pros of Using UPI

• Can be used anywhere
• Easy and fast mode of payment
• UPI wallets can be used to pay electricity or gas bills, shop online or even pay friends
• Most UPI apps are absolutely free of cost

Cons of Using UPI

• Need smartphone and internet connection
• Payments can get failed due to technical error
• It becomes extremely easy to spend money using UPI
• Users should be wary of fraudsters

Credit Card

A credit card is a financial tool that allows you to make payments digitally using a pre-approved credit limit from a bank or other financial institutions. It gives you the freedom to shop now and pay later depending upon your billing cycle.

Many people across the country are switching to credit cards as they can earn rewards, cashbacks, attractive discounts and also enjoy the safety of having a physical card with them without carrying a huge amount of cash.

However, it is extremely important to track your expenses meticulously to avoid paying hefty fine or interest on unpaid amount. Credit cards if misused can lead to financial challenges.

Pros of Using Credit Card

• Easy to use
• Earn rewards and cashbacks on regular usage
• Can be used for online and offline payments
• Can be used to book international hotel or travel bookings
• Maintaining a good payment history can improve your credit rating

Cons of Using Credit Card

• Easy to go overboard with spending
• High-interest amount if the entire bill is not paid on time
• Poor payment history may impact your credit score negatively
• Can lead to unhealthy spending pattern if not monitored properly

Does the Payment Method Really Help You Save Money?

This is the question many people are asking themselves. 

The answer is yes, but partially.

The way of paying influences the amount of money you spend only if you are a spender by nature.

For instance, if you are a person who tends to spend more than you earn, you will continue to do so regardless of whether you pay cash, online, or by card.

However, if you are an organized person who knows how to plan your expenses and never spends more than you can afford, you will always be able to save money regardless of your way of paying.

So, the way of paying is not important. What is important is the way you handle your money.

Which payment option is best to save money?

After discussing the pros and cons of cash, UPI, and credit cards, one might still wonder about the best one.

The fact is that all of the three are useful in their own ways, and it depends on the situation which one is better;

however, 

let us discuss a few situations below in which a particular payment option is more advantageous.

Use of Cash is better when

you need to limit your expenditures

Suppose a person goes to market visit to buy fruits and vegetable and he had 1000 rupees in the purse, it would be possible for plan the shopping accordingly.

Many people use cash as a means to limit their expenses, since they cannot spend any amount as long as they are holding the required amount of money in their hands.

Similarly, some people buy only what they can carry, or what they have planned to buy.

Cash is more useful in

shopping for grocery items, going to markets, and transport fares, etc.,

for limiting one's expenses.

Use of UPI is better when you need instant payment and ease.

One might have noticed that it has become extremely easy to pay in whatever one desires. Whether it is paying electricity bills, small expenses like tea costs, or paying money to friends, any transaction is easy with UPI.

The only problem with UPI is that the convenience it offers might lead to increased expenditure. For instance, one might think that paying only ₹50 as a coffee cost or ₹100 as snack price would not be a problem, but when these expenditures are added up, they might result in a big figure for a month. Using UPI is more reasonable in situations like

paying electricity and water bills, online shopping, and paying money to one's friends and family members.

Use of Credit Cards is better when you want to enjoy rewards and benefits .

As discussed earlier, people mostly get advantages out of credit cards. For instance, one might get a cashback for a certain amount of expenditure, or rewards in the form of points for each bill paid. In situations when it is a planned purchase for the individual, or when one has enough money to pay the due amount of the credit card at the end of the month, it is better to use a credit card. However, one must not fall into the trap of buying things because one can afford to pay the minimum amount due. It is better to have a credit card as a life partner rather than a best friend!

Which payment option is best for students?

Students generally do not require credit cards, unless one knows how to use them. A student can manage with both cash and UPI as discussed earlier.

Which payment option is best for working professionals?

Working professionals mostly stick to either cash, UPI, or credit cards. As discussed above, cash can be useful in small expenses, UPI can be a handy option for most expenditures, and credit cards can help in those situations in which the payment is due but the money is not available. A few pointers for working professionals are as follows:

1. One must pay the total due amount on the day of the credit card payment, rather than paying only the minimum amount due.

2. One must not miss any due date of the credit card payment, as it might lead to other problems.

3. One should learn to keep track of expenses whether one uses cash, UPI, or credit cards, since it would help a lot in keeping the expenditures monitored.

4. One should not rely only on a few modes of payment, since these might turn out to be unreliable sometimes.

5. One should know the advantages and limitations of each mode of payment in different situations, and keep track of the amount spent accordingly.

Some tips to prevent money loss:

It is not always the payment option one chooses that leads to money loss; it is the way one uses it.

Some common mistakes which one should try to avoid are mentioned below:

1. Paying without looking at the amount 

Some people tend to scan a QR code without checking the amount due for payment. One should always verify the amount before making any payment.

2. Buying unimportant things for convenience

It is true that people find it easy to purchase various things these days. However, one should try to avoid buying things just because it is easy. It is essential to consider whether one will need the purchased item.

3. Forgetting the due dates for credit cards

Paying only the minimum amount due or missing the due date completely can lead to several problems, like an increase in one's credit card bill.

4. Not monitoring expenses

It is important to keep track of the amount spent on the use of any payment option, whether cash, UPI, or credit card. This would save one from several inconveniences, like losing track of money due to UPI payments or increased credit card bills due to non-payment of the due amount.

5. Relying only on one option

Every mode of payment has its own benefits, and one should try to consider them.

Whatever be the mode of payment, there is one thing that one should remember and try to follow religiously before making any payment. One should stop for a moment and think, "Is this really necessary?" This would help prevent many financial losses!

Smart Tips to Save More Money, Regardless of the Payment Mode

A lot of people waste a lot of time thinking about whether to pay by cash, UPI, or credit card. However, the actual fact is that your payment method is just a tool, and the way you handle it is what will determine your financial status.

Following are some smart tips to save more money, regardless of the payment mode.

1. Make budget

Before start of month decide how much you are going to spend on food, travelling, entertainment, education etc...

2. Save Money Before Spending It

Once you get your salary, the first thing you should do is save some money. Then, spend the rest of the money according to your monthly budget.

3. Keep a Track of Your Expenses

Regardless of the payment mode, you should keep a track of your expenses. It will help you understand where your money is going. You can even have a look at your bank account or UPI statements once in a while to analyze your spending pattern.

4.Choose payment mode

There is nothing wrong with using cash, UPI, or credit cards. However, you should choose the payment mode according to the situation.

For instance,

You can use cash if you want to keep a tab on your expenses.

You can use UPI for all your small expenses because it is super convenient.

And, you can use a credit card to pay for things you want to buy but only if you are sure that you will be able to pay the bill at the end of the month.

So, Which is the Best Payment Mode?

Now that you have read about the pros and cons of all the payment modes, you must be thinking about which one is the best. Well, there isn't a definitive answer to that question. All the payment modes are good, but in different ways.

If you want to have control over your expenses, cash is the best because you can actually see the money you are spending. If you want to make payments fast and easy, UPI is the best because it is super convenient. If you are a responsible credit card user and you pay your bills on time, then a credit card is the best because it rewards you with points and cashback.

The best payment mode is the one that is the most convenient for you and that helps you stay within your budget.

Final Thoughts

Cash, UPI, and credit cards are all good, but they all have their own limitations. None of them is actually perfect, and none of them will make you rich. It is your responsibility to make smart financial decisions and to stay within your budget.