Cash vs. Credit: Best Guide for Indian Students


Did you know that in 2020, India saw a whopping 25.5 billion digital payment transactions? With the rapid growth of digital payments and credit options, Indian students are increasingly faced with the choice between using cash or credit for their financial transactions. This article aims to provide a comprehensive guide on cash and credit usage in India, helping you make informed decisions when it comes to managing your finances. By understanding the advantages and disadvantages of cash vs. credit, you’ll be better equipped to navigate the ever-evolving financial landscape in India. So, let’s dive in and explore the world of cash and credit!

Cash vs. Credit: Understanding the Basics

Cash: The Traditional Way of Payment

Cash has been the primary mode of payment for centuries, and it involves the use of physical currency like coins and banknotes. People often prefer cash transactions because they are simple, straightforward, and don’t require any additional fees or charges. Cash is widely accepted across India, making it a reliable and convenient way to pay for goods and services.

Advantages of Using Cash

  1. Easy to use: Cash is simple to understand and use, making it accessible to everyone, even those without access to banking services.
  2. No additional fees: When you pay with cash, there are no transaction fees, unlike some digital payment methods.
  3. Privacy: Cash transactions are anonymous, providing a level of privacy that digital payments can’t offer.

Disadvantages of Using Cash

  1. Risk of theft or loss: Carrying large amounts of cash can be risky, as it can be easily lost or stolen.
  2. Limited to physical transactions: Cash can only be used for in-person transactions, making it unsuitable for online shopping or remote payments.

Credit: The Modern Approach to Finance

Credit is a form of borrowing money from a bank or financial institution, allowing you to make purchases without paying the full amount upfront. Instead, you pay back the borrowed amount, often with interest, over a specific period of time. Credit comes in various forms, such as credit cards, personal loans, and mortgages.

Advantages of Using Credit

  1. Convenience: Credit allows you to make purchases without having the full amount of cash on hand, making it convenient for larger expenses or emergencies.
  2. Online and international transactions: Credit cards enable you to shop online and make international transactions easily.
  3. Building credit history: Using credit responsibly helps build a good credit history, which can be beneficial when applying for loans or other financial products.

Disadvantages of Using Credit

  1. Interest and fees: Credit often comes with interest rates and fees, which can make borrowing more expensive in the long run.
  2. Risk of debt: Irresponsible use of credit can lead to mounting debt and financial difficulties.

The Role of Cash and Credit in India’s Economy

  1. Cash is still king: Despite the rise of digital payments, cash remains an essential part of India’s economy. Many small businesses and rural areas still rely heavily on cash transactions due to limited access to digital payment options.
  2. Digital payments on the rise: With the government’s push for a cashless economy, there has been a significant increase in digital payment methods, such as credit and debit cards, mobile wallets, and UPI transactions.
YearDigital Payment Transactions (in billions)
  1. Credit for financial inclusion: Credit plays a crucial role in promoting financial inclusion in India. By providing access to loans and credit cards, banks and financial institutions enable individuals and businesses to make investments, manage expenses, and achieve financial goals.

Understanding the advantages and disadvantages of cash and credit is essential for making informed decisions when it comes to managing your finances. By carefully considering your needs and financial situation, you can choose the most suitable payment method for each transaction.

Tracing the Journey: Cash and Credit in India

A Glimpse into the History of Cash in India

India has a rich history of using various forms of cash, including coins made of metals like gold, silver, and copper. Let’s take a brief look at some major milestones in the evolution of cash in India:

  1. Ancient India: The earliest coins in India date back to the 6th century BCE and were made of silver and copper. These coins were called ‘Panas’ and featured various symbols and inscriptions.
  2. The Mauryan Empire: During the Mauryan Empire (4th to 2nd century BCE), the use of coins became more widespread, with gold coins called ‘Dinaras’ and silver coins called ‘Rupyarupa’ being introduced.
  3. The Mughal Era: The Mughal Empire (16th to 19th century) saw the introduction of new coins like ‘Mohurs’ made of gold and ‘Rupees’ made of silver.
  4. Post-Independence: After India gained independence in 1947, the Indian government introduced new coins and banknotes in various denominations to establish a unified currency system.

The Emergence of Credit in India

The concept of credit in India has its roots in traditional lending practices, where moneylenders provided loans to individuals and businesses. However, the modern credit system in India has come a long way since then. Here are some significant developments in the history of credit in India:

  1. Establishment of banks: The establishment of the first banks in India, like the Bank of Hindustan in 1770 and the State Bank of India in 1806, laid the foundation for modern credit systems.
  2. Introduction of credit cards: The first credit card in India was introduced by Central Bank of India in 1980, marking the beginning of a new era in consumer credit.
  3. Liberalization of the economy: The economic liberalization in the 1990s led to the entry of private and foreign banks, which expanded the availability of credit products like loans and credit cards.
  4. Digital revolution: The rise of digital technology and the internet has transformed the credit landscape in India, with online lending platforms and digital payment systems becoming increasingly popular.

By understanding the history of cash and credit in India, we can appreciate the progress made in the Indian financial system and recognize the importance of both cash and credit in our everyday lives.

Money Matters: Cash and Credit Trends Among Indian Students

How Indian Students Use Cash and Credit

Indian students, like the rest of the population, use a mix of cash and credit for their daily expenses. Let’s explore the current trends in cash and credit usage among Indian students:

  1. Pocket money: Many students receive pocket money from their parents or guardians in the form of cash. This cash is often used for small expenses like snacks, transportation, and stationery.
  2. Digital payments: With the increasing penetration of smartphones and internet access, students are gradually adopting digital payment methods, such as UPI, mobile wallets, and debit cards, for various transactions like online shopping, bill payments, and food orders.
  3. Credit cards: While credit card usage among students is relatively low, some banks and financial institutions offer student-specific credit cards with lower credit limits and customized benefits, such as discounts on books, movies, and dining.
  4. Educational loans: Many students rely on educational loans to finance their higher education, especially for courses with high fees or studying abroad.

Visualizing the Trends

The following table illustrates the percentage of students using different payment methods:

Payment MethodPercentage of Students
Debit Card65%
Mobile Wallet50%
Credit Card15%

Note: The percentages are approximate and may vary based on factors like age, location, and access to financial services.

By understanding the current trends in cash and credit usage among Indian students, we can gain insights into their financial behavior and preferences, which can help in promoting financial literacy and responsible money management.

The Future of Cash and Credit in India

In the coming years, the way we use cash and credit in India is expected to change drastically. Let’s explore some predictions about the future of cash and credit usage in the country and see what experts have to say.

1. Digital Payments on the Rise

One of the most significant changes we can expect is the increase in digital payments. According to a report by BCG, digital payments in India are predicted to increase four-fold by 2025. This means that more people will start using digital wallets, UPI, and other online payment methods instead of cash or credit cards.

“The digital payments market in India is expected to grow to $1 trillion by 2023, led by the growth in mobile payments.” – Reserve Bank of India (RBI)

2. Decline in Cash Usage

As digital payments become more popular, we can expect a decline in cash usage. According to a study by PwC, the share of cash transactions in India is expected to drop from 70% in 2019 to 48% by 2024.

3. Credit Card Usage May Slow Down

With the rise in digital payments, the growth of credit card usage may slow down. People are likely to prefer using digital wallets and UPI for their transactions, which offer more convenience and security compared to credit cards.

“UPI has the potential to displace credit cards in India, as it provides a more seamless payment experience.” – Nandan Nilekani, Co-founder of Infosys and Chairman of UIDAI

4. Increased Financial Inclusion

The growth of digital payments will also lead to increased financial inclusion in India. More people, especially those in rural areas and the unbanked population, will have access to financial services through digital platforms.

YearNumber of Unbanked Adults (in millions)

Source: World Bank Global Findex Database

5. Enhanced Security Measures

As digital payments become more common, we can expect better security measures to protect users from fraud and cyberattacks. This will include advanced encryption technologies, biometric authentication, and stricter regulations to ensure the safety of users’ data and money.

The future of cash and credit in India seems to be heading towards a more digital and inclusive landscape. With the rise of digital payments, we can expect a decline in cash usage and a possible slowdown in credit card growth. As technology continues to evolve, we can look forward to a more secure and convenient financial ecosystem in India.

Cash vs. Credit: Making Smart Financial Choices for Indian Students

Understanding how cash and credit usage can impact financial decisions is essential for Indian students. In this article, we will explore the effects of using cash and credit on financial decision-making and offer tips to help students make informed choices.

How Cash and Credit Impact Financial Decisions

Using cash and credit can have different effects on the financial decisions of Indian students. Let’s look at some real-life examples and scenarios:

  1. Budgeting and Saving: When students use cash for their expenses, they can easily track their spending and stick to a budget. On the other hand, using credit cards might lead to overspending, as it’s easy to lose track of how much you’re spending when you don’t see the physical money leaving your wallet.
  2. Debt Management: Using credit cards can lead to accumulating debt if not managed properly. If students don’t pay their credit card bills on time, they can end up with high-interest debt, which can negatively impact their financial future.
  3. Credit Score: Responsible credit card usage can help students build a good credit score, which is essential for getting loans, renting apartments, and even securing jobs in the future. However, irresponsible usage, like missing payments or maxing out credit cards, can harm their credit score.

Tips for Making Informed Decisions

To make smart financial choices, here are some actionable advice on how to choose between cash and credit for various transactions:

  1. Understand the advantages and disadvantages of using cash and credit:
Easier to track spendingNo rewards or cashback
No debtNot suitable for large purchases
Accepted everywhereLess secure
  1. Create a budget: To make informed decisions, students should create a monthly budget and track their expenses. This will help them understand how much money they can allocate for cash and credit card transactions.
  2. Use credit cards responsibly: Students should use credit cards for planned expenses and pay their bills in full every month to avoid accumulating debt and damaging their credit score.
  3. Prioritize needs over wants: When deciding between cash and credit, students should prioritize essential expenses, like tuition fees, rent, and groceries, over non-essential items, like eating out or shopping for clothes.
  4. Choose the right credit card: If students decide to use a credit card, they should research and choose a card that offers rewards and benefits that align with their spending habits and financial goals.

In conclusion, understanding the impact of cash and credit usage on financial decision-making is crucial for Indian students. By following the tips provided in this article, students can make informed choices and develop healthy financial habits that will benefit them in the long run.


What are the main differences between using cash and credit?

Cash transactions involve physical currency and are accepted everywhere, while credit transactions involve borrowing money and may not be accepted at all merchants. Cash doesn’t offer rewards, while credit cards often do. Tracking spending is easier with cash, while using credit cards may lead to overspending.

How can using cash help with budgeting and saving?

Using cash can help students stick to a budget because they can physically see the money leaving their wallet, making it easier to track spending and avoid overspending on non-essential items.

Can using a credit card help build a credit score?

Yes, responsible credit card usage, such as making timely payments and keeping credit utilization low, can help students build a good credit score, which is important for securing loans, renting apartments, and even getting jobs in the future.

What are some tips for using credit cards responsibly?

Tips for using credit cards responsibly include paying the full balance every month, not using the card for impulsive purchases, keeping credit utilization below 30% of the credit limit, and regularly monitoring the credit card statement.

How can students choose the right credit card?

Students should research and compare different credit cards based on factors like interest rates, rewards, fees, and benefits, and choose a card that aligns with their spending habits and financial goals.

Are there any alternatives to credit cards for students?

Yes, alternatives to credit cards for students include debit cards, prepaid cards, and digital wallets like Paytm, Google Pay, and PhonePe, which can help students make digital transactions without the risk of accumulating debt.

How can students prioritize their expenses when deciding between cash and credit?

Students should prioritize essential expenses like tuition fees, rent, and groceries over non-essential items when deciding between cash and credit. Creating a monthly budget and tracking expenses can help make informed decisions and develop healthy financial habits.


In summary, understanding the differences between cash and credit is crucial for Indian students to make informed financial decisions. Key points to remember include the advantages and disadvantages of using cash and credit, the importance of budgeting and prioritizing essential expenses, and the responsible use of credit cards to build a healthy credit score.

Recognizing the impact of cash and credit usage on financial decision-making can significantly influence a student’s financial future. As Indian students embark on their financial journey, it’s essential to develop a strong foundation in managing their finances and making smart choices.

So, what steps will you take to make better financial decisions? We encourage you to continue learning about personal finance and apply the tips and insights shared in this article to cultivate responsible financial habits that will benefit you throughout your life.

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