Paying by Check vs. Paying With Cash: Pros and Cons

There are benefits and drawbacks to every payment method. Cash payments are those made with paper bills and coins. Payment by a paper check involves the use of a negotiable instrument that transfers money from one bank account to another. From a personal finance perspective, there are pros and cons for both cash and checks.

Some of the pros of paying with cash include:

One of the biggest benefits of cash is that it is basically free to use. Cash is fee-free unless you have to pay a cashing fee to obtain bills from an ATM, bank or check cashing store.

Unlike swiping a credit card, there is no interest rate applied or credit card company to pay when you remove cash from your wallet.

Another difference between credit cards, paper checks and cash is the spending limit. When using cash at the grocery store, your list is limited by the amount of cash you have. If you are writing a check or using credit, you can go over budget, dip into your checking account or tack on to your credit card balance.

When you pay with cash, no identifying details are exchanged between you and other parties. The Federal Trade Commission's Consumer Sentinel Network fielded more than 5.7 million fraud complaints in 2021, including identify theft. Transactions made with cash are secure because no checking account numbers, credit card numbers or personal data are exchanged.

Currency is considered a store of value because it is a commodity that has an intrinsic value, durability and portability, as explained by the Corporate Finance Institute (CFI). Cash maintains inherent value over a long period and can be used as a means of saving.

When the power is out, your ability to access electronic funds via a credit card, debit card or mobile app can get tricky. As long as someone is willing to accept your payment in cash, your bills and coins are always in working order.

The Federal Deposit Insurance Corporation (FDIC) reports that 5.4 percent of American households are unbanked, meaning that no one in the household has a credit union or bank account. Over 7.1 million people in the U.S. cannot cash a check at a financial institution or check cashing store without paying a fee – if they can cash the check at all. Cash can easily pass from one person to another without ruling anyone out.

Some of the pros of paying by check include:

Checks don't have an interest rate associated with their use. The funds used to pay the check are your own and are drawn directly from your checking account.

The only fees associated with personal check usage are the cost of purchasing the checks in the first place and any bank fees related to check transactions. Most financial institutions have some version of a "free checking" account that eliminates transaction fees and may even give customers a certain number of free paper checks.

When you write a check and record it in your check register, you have a record of what you spent and who you paid. When that check is processed, and electronic funds are transferred via the check's routing number, a transaction record is available to both the payee and the payer.

Checks are easier to send by mail and more secure than cash. If cash is taken from an envelope, there is nothing to trace. When a check is stolen, the steps a thief has to take to attempt to process it help to track where the payment went.

When a paper check is discovered to be lost or if services rendered aren't to a payee's satisfaction, a check writer can request a stop payment on the check. The financial institution can execute the stop payment if the payment hasn't gone through yet.

Personal checks are a great form of payment for large purchases for the reasons above: no interest charges, an automatic paper trail and the support of a financial institution if things go sideways. In addition, a checkbook is very easy to carry around.

Some of the cons to paying with cash include:

The larger the purchase, the more painful this downside of cash becomes. Whether you lose a single bill or an envelope full of cash, when paper money is gone, it is untraceable and not replaceable.

When paying by cash, the payee and payer can draw up a receipt and sign it to create a paper record. But there is no electronic record by a third party, and you aren't able to track it in your online banking with other transactions.

There is no way to pay with paper bills and coins online. You can do an electronic funds transfer or use a peer-to-peer platform to send cash, but you cannot use cash through your mobile device or PC.

You can put cash into an envelope and mail it, but this is especially risky if it's a large purchase. You can send cash via USPS Registered Mail® and insure it, but that comes at a cost.

When you have a large purchase, carrying an envelope full of cash isn't convenient – and it's not very secure.

Some of the cons to paying by check include:

Checks aren't as quick as cash or a credit card since you must fill them out and endorse them.

The risk of fake checks and insufficient funds can make some small businesses reluctant to accept personal checks. If a check is made out incorrectly, it can get returned without being paid.

Credit cards process in an instant. Cash is exchanged in real-time. Check transactions, though, take an extended period of time to complete. The payee must deposit the check and wait one or more business days before the funds are available.

If you go over budget or miscalculate and spend more money than you have in your checking account, you will get charged an overdraft fee by your bank. The pricing of fees varies from bank to bank, but most will add another fee for every check you bounce.

Depending on which benefits are most important to you for a given transaction, you may choose one form of payment over another.