Cash vs. Plastic
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Photo by DCE licensed under Creative Commons
I’ve seen many personal finance sites recommend that when trying to keep a budget, you should only spend money in cash rather than using a credit or debit card. This, the common wisdom says, will help you be more aware of the amount of money that you’re spending and make you less likely to part with it. There’s just one problem. It doesn’t work for me.
When I go into a store, I almost always know what I’m going to buy. But on those rare occasions that I don’t, paying with cash is one of the surest signs that I’ll be parting with my money. The problem is this. When I spend cash, I inevitably end up with lots of smaller bills which are harder to keep track of (at least psychologically) and seem less worthy of my attention. So if I’m going through checkout with a loose $1 bill, I’m much more likely to get that pack of gum, or box of matches, or mini-lint-roller-that-I-don’t-really-need than I am if I go through with with larger bills and pay with plastic.
I don’t claim to know why it works this way for me, but it does. I consistently spend less when I use a credit or debit card than I do when I use cash.
What about you? Does plastic or cash cause you to spend more? Does it even make a difference at all?
I understand the logic of why you should use cash instead of credit while you’re getting debt under control but using just cash is virtually pointless for me. I’m just like you in this respect so I took the middle option, I use my debit card for everything - works the same way as plastic but comes directly out of your bank account and there’s no change rattling in your pocket.
Posted on February 14th, 2008 at 2:24 pmI have to use my debit card! I can’t handle cash…it’s so easy to spend…street vendors accept it…so does my favorite ice cream place!
Posted on February 15th, 2008 at 1:06 pm@Matt: I’m looking forward to using my debit card instead of my credit card again. That will be quite a nice day.
@SavingDiva: I know just what you mean. For me, trying to hold onto cash is like trying to hold onto water. It just slips through my fingers.
Posted on February 20th, 2008 at 10:15 am