In a digital wallet age controlled by high-rewards credit cards, cash seems to be of a bygone era. However, there remain some purchases that are smartly moneyed to do with cash. From shying away from obscenely high surcharges to extricating yourself from overspending problems, these are five key buys where cash is still the way to go.
1. College tuition
Credit card tuition paid in the expectation of earning rewards can look tempting, but most schools charge 2%–3% on card payments-a rate significantly higher than usual cash-back rewards. On a $10,000 tuition payment, that is $200–$300 extra. Worst of all, carrying that much balance on a high-interest card could trap families in debt: A $5,000 tuition charge on a card with 19% APR would take 23 years to pay off with minimum payments, costing more than $7,300 in interest. Colleges waive these fees for direct bank transfers or checks, so cash-equivalent payments are the way to go.
2. Medical bills
Physicians increasingly are tacking credit card processing fees, as high as 4%, onto invoices. While 76% of customers want to pay by card due to ease, paying physician bills in cash skirts the charges. On a $5,000 procedure, paying on the card could be an extra $200. Beyond that, medical debt usually offers less consumer protection than credit card disputes, making payment in cash a more visible, feeless solution. Others give cash discounts on the spot to up-front paying cash customers, especially for uninsured elective surgery.
3. Government agencies
DMVs, courts, and local postal systems typically charge 2%–3% credit card convenience fees. They claim that taxpayers should not be subsidizing transaction costs out of their taxes, but instead as customers. As an example, paying a $150 driver’s license renewal by card could cost a $4.50 fee-a 3% discount compared to paying cash. Surprisingly, even in surcharge states for retail, government agencies generally retain fee-passing exceptions, so cash continues to be the default cost-saver for passport fees, parking fines, or city licenses.
4. Gasoline
Gas stations demonstrate cash’s time-tested advantage through split pricing: The national average cash discount was $0.15 per gallon in 2024. Piling up a 15-gallon tank saves $2.25 per fill—a 3%–5% discount that mounts up over time. Stations rationalize this by citing high interchange fees on credit cards (2.5% + $0.10 average per transaction), which eat into narrow fuel margins. While some debit cards qualify for cash pricing, cash remains the best means of avoiding markup, especially at independent stations where discounts are up to $0.30/gallon.
5. Tax payments
IRS and most states charge credit card transaction fees for using a credit card to pay taxes-up to 1.98% for federal taxes. If a $10,000 bill were paid using the card, there would be an additional non-deductible $198 fees, wiping out even high-end travel rewards. Cash payments through IRS-accepted cash networks such as retail affiliates CVS cap charges at $3.95 without limit on payment amount. Cash for small business also bypasses the 2.3%–3.5% merchant fees charged to card-based quarter tax payments.
The case for cash behaviorally
Barring fees, psychological considerations encourage cash for this kind of business. Research reveals individuals spend 12%–18% less when they make payments in visible money because the “pain of parting” of relinquishing seen bills reduces spending. It is particularly substantial for high-takeout payment transactions like taxes or medical expenditures, where psychological choice can end up costing excessively.
Whereas plastic dictates daily spending, wise use of cash preserves savings on major purchases. By avoiding processing charges of 1%–4% and enjoying cash discounts, households have the potential to save hundreds annually. As WW International CEO Tara Comonte might say: Total financial fitness is about juggling the convenience of the moment and old-fashioned frugal wisdom-and sometimes, that entails searching for paper rather than plastic.
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