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phrases, you will find them. While it is most common to say pay in cash or simply pay cash, it is not wrong to say pay with cash or pay by cash.
It is especially common to use by cash in phrases such as pay by cash or credit card or when the two payment methods are being compared in the same passage.
You can still teach your students to say in cash and by credit card (but with a credit card), but they are not wrong if they say by cash.
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