Cash vs. Credit: Knowing Which to Choose

Do you have a car time deciding when to choose cash or credit? Here is the information you need to choose with financial certainty.

When you’re about to make a purchase, do you struggle to make a decision whether to pay with cash vs. credit?

If you do, no worries. Deciding between the two is actually pretty tricky business. Both have their perks, and both have their downfalls.

However, consistently making the right choice at checkout when it comes to cash vs. credit can save you some serious bucks in the long run actually.

But, how do you know which one to choose?

If you need some schooling on the benefits of each, read this article. We delve into everything you know so you can make the right decision every time.

When to Say No To Credit:

If the Fee Isn’t the Best Available Deal

Looking to rack up some rewards points on your credit card?

Thinking that using your card to pay your mortgage, health insurance premium, or other recurring bills is the best way to do so?

Well, think again.

First of all, many services don’t even allow credit card payments. And. even if they do, they’ll typically smack you with a huge fee that cancels out the value of the reward points.

If You Haven’t Negotiated With Your Creditor

Rack up any huge expenses lately?

Well, before you bust out the credit card, you’ll want to contact the company’s billing department. There’s a chance that they offer a payment plan or that you can get some of the balance reduced.

It’s best to look into all of your options before dropping a huge amount on your credit card.

If You Are in the Process of Obtaining a Mortgage

A big change in your credit activity is a huge red flag to mortgage underwriters.

From the time you apply for a loan to the time it closes, it’s best not to drop any major charges on your credit card that could affect your credit score in any way. A hit to your credit score could potentially disqualify you for the loan, which obviously is the last thing you want.

Use the mortgage process as a time to take a break from the credit card and from any major shopping sprees.

If You Want Something You Can’t Afford

We’d like to think this one would seem obvious, but seeing as the average credit card debt in Australia is $3,083, maybe it isn’t.

No matter how tempting it is to purchase this luxury item, if you don’t need it, don’t buy it.

We realize this is most definitely easier said than done. So, if you struggle to put down the plastic, consider implementing the envelope system.

With the envelope system, you take out a certain portion of your paycheck out and divide it into envelopes based on your spending needs. For example, one envelope can be for rent, the other for groceries, the other for gas, etc. You are allowed to transfer money between the envelopes, but once you run out, that’s it for the month.

If You Already Have a Balance

Again, to some people, this is an obvious one. But to others, not so much.

Piling on more debt to an already existing balance is a bad idea. This is exactly what leads to a never-ending cycle of debt.

Instead, make it a habit of paying off your credit card immediately after making a purchase. This will help ensure that you get an awesome credit score.

If you already have a balance that needs paying off, then cash definitely wins int cash vs. credit card debate.

When to Say Yes to Credit:

If You Want Additional Warranty Protection

If you’re about to make a major purchase and want some extra protection, then your credit card is the way to go.

Almost all card issuers offer purchase protection as well as an extended warranty for the purchase made with the card.

For example, Visa and MasterCard both double the warranty. MasterCard even ensures the purchase against theft or damage for 90 days.

If You Want Stronger Fraud Protection

Every one is liable to fraud. And at some point, most people have to deal with a stolen or lost card.

In fact, in just 2015 alone, more than 770,000 Australians were victims of identity theft.

There are a lot of preventative measures you can take to securing your identity. However, in the event someone gets a hold of your information, credit card protection is much stronger than debit.

If a loss is reported after unauthorized use occurs, you are usually only liable for up to $50. With debit cards, you can be held liable for an unlimited amount if you don’t report the fraud in time (usually it’s a 60-day window).

If You Want to Take Advantage of Benefits

Pick a credit card that is co-branded, and you’ll be offered some pretty sweet deals that are hard to pass up on.

For example, if your credit card is co-branded with an airline and you buy your flight with that card, you can often times get a free checked bag.

Hotels tend to get in on this action as well. Many offer special amenities or free upgrades to customers who pay with a partnering credit card.

If You Want To Take Advantage of a Rewards Program

Almost every credit card these days has a rewards program.

Taking advantage of yours can actually save you some serious money. Some offer cash back, while others offer points, allowing you to earn hundreds, maybe even thousands of dollars back each year.

If You Want Security While Traveling

Traveling tends to put you at greater risk for fraud.

Lost cash or a lost debit card is next to impossible to recover anywhere, especially in a foreign country. However, losing your credit card abroad requires the same simple protocol as back home. All you need to do is call your bank to cancel.

Cash Vs. Credit Conclusion

If you never have a problem immediately paying off your credit card, then choosing it over cash will probably be most beneficial to you.

If, however, you tend to succumb to debt easily, it’s best to avoid using your credit card save for emergency situations and special circumstances.

Got any questions about the cash vs. credit decision process? Drop us a comment below!

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.


Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice –

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat