If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

Main content

Using cash vs. credit card, and other payment methods

Learn about the pros and cons to using different payment methods.

What is the best way to pay for something?

There is not necessarily a "best" way to pay for something – it depends on your personal preferences and financial situation. Typically, people use cash, debit, or credit cards as payment methods, but there are other ways to pay for something. Let's look at the three most common ones and then we can discuss other payment options.
four 20 dollar bills, and two credit cards
Cash, debit, or credit?
Image credit: "Credit cards & money" by ccPixs.com, CC BY 2.0.

Types of payment methods


Cash can be a good option if you want to avoid overspending, as you're limited to the amount you have on hand. However, carrying large amounts of cash can be risky, and you won't be able to make large purchases this way.

Debit Cards

Debit cards pull money directly from your bank account, so you don't have to worry about incurring interest charges like you would with a credit card. However, some people don't like that debit card transactions can take a few days to process, which can make it difficult to keep track of your account balance.

Credit cards

Credit cards allow you to borrow money to make purchases, which can be helpful if you don't have the funds readily available. Additionally, some credit cards offer rewards like cash back or travel points. However, if you don't pay your bill in full each month, you'll be charged interest on your outstanding balance. Credit cards can also be a temptation to overspend, which can lead to accumulating debt.
Payment MethodProsCons
Credit CardAllows purchases without immediate fundsCan lead to overspending
Offers consumer protectionsHigh interest rates
Can help build credit scorePotential to damage credit score
Debit CardAvoids overspendingLess consumer protection
ConvenientVulnerable to fraud
No interest charges
CashAccepted in-person anywhereCan't be used online
Helps with budgetingInconvenient or unsafe to carry in large amounts

What are other ways to pay for items?

There are ways that consumers can buy things on credit without using a credit card. Here are four common alternatives:


With rent-to-own agreements, consumers can take home items like furniture, electronics, or appliances, and make weekly or monthly payments on them until they are paid off. Rent-to-own stores usually do not require a credit check, which makes them a popular option for people with bad credit. However, consumers should be aware that they usually end up paying much more for items than they would if they bought them outright.

Store Credit

Many retailers offer store credit (or in-store financing), which lets consumers buy items and pay for them over time. Store credit can come in the form of a line of credit (like a credit card), or an installment plan, where consumers make fixed monthly payments over a set period of time. For example, if you buy a new TV from a store that offers store credit, you can pay for it in 12 monthly installments. While some stores offer zero-interest financing, others may charge interest or fees.

Installment Agreements

An installment agreement is a type of contract that lets a consumer buy a product or service and pay for it over time. It is similar to store credit, but it can be used for a wider range of purchases. For example, you might use an installment agreement to buy a car, pay for a medical procedure, or even finance a vacation. With an installment agreement, you agree to make fixed monthly payments for a set period of time, usually with interest.


Layaway is a purchasing arrangement that some stores offer to customers. With layaway, a customer can reserve an item they want to buy, and make payments towards the total cost over time. For example, if you want to buy a TV that costs dollar sign, 500 but you do not have the full amount at the time. With layaway, you can pay for the TV by paying a certain amount each week or month until you've paid the full retail cost. Once you've paid in full, you can take the TV home.
Layaway is sometimes used as an alternative to credit cards or other forms of borrowing, as it doesn't usually involve interest charges. However, some stores might charge a service fee for setting up a layaway plan.

Want to join the conversation?