Ideally, you would be organized enough to use each of these three types of payment in the situations when they provide the most advantages. This would allow you to limit the drawbacks of each form of payment while taking advantage of the positives.
So when should you use cash, credit or debit?
Cash is king when you are on a tight budget. This is because it is easy to count every cent when you can physically see your money. Some people use envelopes for different types of spending. When the cash for the month is gone from the envelope, they cannot spend any more until the next month. This forces people to stay on budget. Some could find cash lacking in terms of convenience and safety (if your cash is lost or stolen, you really have no way to get it back). However, for people who like to stay on a tight budget, this form of payment is still the best.
Credit cards are the best for purchases where you want extra fraud protection. When you make purchases online, you should use a credit card instead of a debit card. This is because credit cards offer the best protection against fraud. Most companies have fraud departments that will investigate claims, and they will freeze any payments until the issue is resolved. This means you will not have to pay anything if there was indeed fraud committed. With debit cards, the money is withdrawn from your checking account immediately when you make the purchase. You can still make a claim of fraud, but you will not get your money back until the investigation is completed.
Debit cards are the best when you do not want to increase your debt. Debit cards offer the same conveniences as credit cards with one important difference: because the money is drawn from your checking account, you do not build any debt. If you already suffer from credit card debt, then debit cards are usually the best option for balancing both convenience and budgeting.
Are these the only options?
When it comes to day to day spending, these three options are the most common, but there are other ways to pay. For example, instead of a credit card, you could get an online personal loan. These loans are easy to apply for because they do not usually require a complete credit check. The process may only take a few hours. Once approved, the money will be deposited into your bank account. You can then withdraw it at an ATM and use cash or use a debit card.
If you can manage all these forms of payment together, you will be able to have the best means of payment for each situation.