Conscious Spending - Credit Card vs. Cash

[SFA]

I've read several posts on here and many seem to be related to credit card spending vs cash spending.

Personally, I use my credit card for every single purchase possible. Why? Because I get cashback, allowing me to have a free vacation this summer. Also, it helps build my credit while I'm in college and not financing major purchases yet. That's not my point though.

My point is as follows:
Why would you spend more with a credit card than cash? After all, it is easier to track your spending with a credit card. With that said, if you create a conscious spending plan you can spend money freely without feeling bad about it or worrying if you have enough. I never question my purchases because I know exactly how much I have planned to spend on them; therefore, I don't spend more than I would like.

I completely understand that cash is a visual and that is why people can more consciously spend with it; however, it just seems like a waste of rewards that your credit card company offers.

I would elaborate on this but I am writing an in depth article for my website shortly.

What are your opinions of cash vs. credit card spending? Why can people not control their spending with a credit card... if they know they have XYZ amount to spend on ABC?

[disneysteve]

Originally Posted by SFA

Why would you spend more with a credit card than cash? After all, it is easier to track your spending with a credit card.

What are your opinions of cash vs. credit card spending? Why can people not control their spending with a credit card... if they know they have XYZ amount to spend on ABC?

I agree with you 100% but you and I are in the minority. The reason is exactly what you mention here:
"if they know they have XYZ amount to spend on ABC?"

Most people don't have a clue how much they have or how much they can or should spend on ABC. Most people simply don't track or manage what they have. They basically are flying blind. That's why they rack up CC charges that they can't afford. That's why they overdraft their checking accounts. That's why they get hit with late fees. That's why they can't manage to save any money. That's why they sometimes even spend themselves into bankruptcy.

I know exactly what I have. I know exactly how much I'm willing to spend for things. How I pay is completely irrelevant to whether or not I make a particular purchase. It doesn't matter if I'm using cash, credit, debit or check. Either I'm going to spend the money or I'm not. I'm not willing to spend more or less based on the payment method. I can't comprehend how anyone thinks otherwise, but lots of people do apparently.

[SFA]

Originally Posted by disneysteve

I know exactly what I have. I know exactly how much I'm willing to spend for things. How I pay is completely irrelevant to whether or not I make a particular purchase. It doesn't matter if I'm using cash, credit, debit or check. Either I'm going to spend the money or I'm not. I'm not willing to spend more or less based on the payment method. I can't comprehend how anyone thinks otherwise, but lots of people do apparently.

Yeah... I guess it is ignorant for me to think that everyone thinks like this. Wishful thinking I guess.

[GREENBACK]

We can blame whomever but it is a serious lack of personal financial responsibility by people. CC's have nothing to do with overspending. Lack of accountability by those using them has everything to do with overspending. It's not the fault of the gov't or the banks or your parents. Before you begin to spend money you should know it's value (CC or cash). That's burden is on the spender, IMO.

[lendnotborrow]

You make a valid point. If you pay off your credit card in full every month without fail, then your point is even stronger. The problem is, most people don't pay it off in full on a monthly basis and so you're dealing with more than a few rewards. You then deal with various fees, interest, etc. If there is one month that the card is not paid for in full, then in my opinion, cash will prevail.

[marvholly]

Like DS, to me it does not matter how I pay: real folding money, cc, or check (maybe not this-takes WAAAY too long to get on approved these days). I KNOW how much I now have and/or will have in time to pay that and ALL my routine bills.

Those of us like that are WAAAY too few and far between these days. Guess I am lucky since I raised two kids w/the same mindset.

[MonkeyMama]

I personally think a lot of this cash versus credit debate will be erased by future generations. Not the personal responsibility part, but this idea that people simply spend more with credit all around, and treat it differently.

My experience? I have had a card since I Was 16. my parents got me one to teach me responsibility with credit. That said, I have mostly never dealt with cash. I have always written checks or swiped a credit card. I think of money as electronic. With age, I manage it all on the computer and download my transactions and watch them carefully. I don't *get* at all why paper cash would be easier to track and manage. It isn't. Cash is easy to lose, and then I'd have to remember to right every single purchase down. It just adds more complication to a very simple money management system.

My theory is people have a hard time moving from cash to electronic payments. They say some of the same things about debit cards, when it comes to people spending more in studies, etc. I've always supposed it's hard to make that mind shift if you are really used to cold hard cash.

I think this generation is going to grow up with electronic money. As I did. I don't think there is going to be such a disconnect.

Beyond that, there are the people who think ahead to consequences and are going to treat their credit like cash. I am one of them. I could never run up a credit card bill and worry about how to pay for it later. I suppose a lot of that is just personality. With my personality, and having never dealt with cash, I don't see what is so scary about credit cards. Seems as simple to me as pretending like it is a debit card and not charging any more than I have to spend. I found that to be a very simple mindset to maintain. There is nothing tempting to me about charging more and paying the interest and fees, eventually.

[disneysteve]

Originally Posted by MonkeyMama

I don't *get* at all why paper cash would be easier to track and manage. It isn't.

Absolutely. It is far easier to track spending when using a credit card. Cash doesn't create a paper trail like credit does. I can log onto my credit card account anytime and see exactly how much I've spent and where I've spent it. At the end of each year, I can download an annual summary of my charges broken down by category (auto, dining, travel, etc.). Cash gets spent and is gone and that's it. No record unless I go to the trouble of keeping a written log.

[LivingAlmostLarge]

I thought I dropped literally $20 out of my wallet. Trying to figure it out, I found it later in my pocket. I knew I didn't spend it but I couldn't figure out where it may have gone. Honestly I'm not the best with cash, but at least with CC i don't have to worry if I lose it. And yes I've lost my wallet 3x and never gotten the cash back but the CC.

Personally I find I am always scrambling with stuff in my hands with a cell phone, wallet, keys, kid, sometimes dog, etc. So it's easier for me to just now worry about cash. Dropping a receipt or even CC isn't such a big deal.

[dczech09]

I have done all of the different kinds of methods of spending money (credit, debit, and cash). Personally I like spending cash because I don't feel so distanced from my money. However I really haven't noticed a change in my spending behaviors from when I used credit or debit.

As a Generation Yer, I definitely agree that the whole cash versus credit debate is really unimportant. Really the debate needs to focus more on "what" and "where" you spend money and less on "how." It really doesnt matter how you spend your money; the "how" is not going to make you wealthy by any stroke of the imagination.

I know studies have been done stating that people spend less with cash. However, if you budget properly and only spend money that you have and actually be intentional with where your money goes, then spending more does not really enter the question. I think the whole spending more argument only applies to people how don't have a plan and don't have a clue.

[clintdavis]

I posted these links in another discussion. But they are definitely relevant here.

The majority of people do spend more when using credit cards than when using a debit card or cash.

According to the Journal of Experimental Psychology, consumers spend 10-20% more when buying with a credit card. You can find the study here: http://www.apa.org/pubs/journals/releases/xap143213.pdf

And this study by DRAZEN PRELEC AND DUNCAN SIMESTER of the Sloan School of Management at MIT, supports the same findings. - http://web.mit.edu/simester/Public/P...sleavehome.pdf

And another interesting finding in those studies...when people were making a decision on how much to spend on an item of subjective value (i.e. tickets to a sporting event, etc...), on average the test subjects were willing to spend 100% more when they were making the purchase with a credit card.

[LuckyRobin]

Sometimes I think using a credit card can put people into a sort of mindless zombie mode. I have on occasion in the past caught myself swiping my credit card without having even been told the total by the cashier or even having seen the total and then realizing when I got to the car that I didn't even know what I had just spent and having to check the receipt. And if someone like me, who is reasonably responsible with her spending can do this once in a while, I imagine the greater population who is more careless, does it a lot (if they even bother to check their receipts at all). This is why I prefer using a check, which I know is antiquated, but I like it for regular purchases. You are told the total, you write it twice (once in long hand and once in the little box) and then later again when you balance the checkbook you see it one more time. If you have carbons(which I do), you have a running total as well. Cash itself (paper money) can be a little too easy to fritter away as well. Using a checkbook keeps me mindful in day to day spending. I do use electronic payments on a lot of bills, but they also get entered into the check register. I guess I'm old-fashioned with a mix of new-fangled just to keep it interesting.

[disneysteve]

Originally Posted by LuckyRobin

Sometimes I think using a credit card can put people into a sort of mindless zombie mode. I have on occasion in the past caught myself swiping my credit card without having even been told the total by the cashier or even having seen the total and then realizing when I got to the car that I didn't even know what I had just spent and having to check the receipt.

I'm not sure of your point here. I also swipe my card before hearing the total. The total really doesn't matter because I haven't bought anything that I can't afford. Most of the time, I have a pretty firm idea of what the total is based on what I put into my cart anyway. And I've already made the decision to buy the stuff at that point. Hearing the total isn't going to change that. Of course, I want to be sure I've been charged correctly and nothing got rung up twice or scanned for the wrong amount.

[LuckyRobin]

Originally Posted by disneysteve

I'm not sure of your point here. I also swipe my card before hearing the total. The total really doesn't matter because I haven't bought anything that I can't afford. Most of the time, I have a pretty firm idea of what the total is based on what I put into my cart anyway. And I've already made the decision to buy the stuff at that point. Hearing the total isn't going to change that. Of course, I want to be sure I've been charged correctly and nothing got rung up twice or scanned for the wrong amount.

My point is that hearing that total reinforces in my mind how much I am spending. Not hearing it (which is often the case when using a card) doesn't do that. The original poster asked why you would spend more with a credit card than paying cash. My answer is that it's easier to swipe and ignore than it is to count out money or write a check. It is easier to go over budget if you never hear the total. Hearing the total before writing the check can tell you that you went over your budgeted amount and should put something back. With a credit card if its a little over, the mindset I see with many people is often that it is "okay" as long as it's under your credit limit. You can't have that mindset with cash, or with a checkbook (unless you are willing to bounce a check). The general population has its head in the sand when it comes to their credit cards. It is easier to have your head in the sand with a credit card than it is to be an ostrich with a checkbook. Not everyone can be super disciplined about their credit card use. That is why this country is so far into debt.

[dczech09]

As I stated earlier, I strongly believe that our debt problem in this nation has less to do with "methods" of handling transactions, and more with irresponsibility/ignorance.

Whether you use a CC to facilitate transactions, write a check, swipe the debit card, or hand over cash, you are simply using a different method to handle the transaction.

As for studies showing that CC users spend more, that still has a lot more to do with irresponsibility/ignorance than it has to do with the CC itself. People spend more because they simply ignore what they're doing. If you're intentional with the CC and not a mindless zombie, then the CC really is not going to hurt.

I see a CC as being like a hammer. If used skillfully and mindfully, it can be of some good use. If used by a clown who swings it carelessly, it can destroy things.

[disneysteve]

Originally Posted by LuckyRobin

Hearing the total before writing the check can tell you that you went over your budgeted amount and should put something back.

I guess that's the part I can't relate to. This has never happened to me and never will happen to me. I don't take things up to the register that are beyond my budget. I don't need to hear the total to know that I'm not overspending. It just boggles my mind that people are that oblivious that they don't know if they've spent too much until the cashier rings up the items.

[couchrobt]

Being spend conscious is not so bad. Like I always say, the shopping or the spending has got to have schedule. That is how I get to buy stuff and yet pay my bills. Call me old school but it works. At least for me.

[LuckyRobin]

Originally Posted by disneysteve

I guess that's the part I can't relate to. This has never happened to me and never will happen to me. I don't take things up to the register that are beyond my budget. I don't need to hear the total to know that I'm not overspending. It just boggles my mind that people are that oblivious that they don't know if they've spent too much until the cashier rings up the items.

Well, I certainly seem to end up behind a lot of people who do have to put things back and they are almost exclusively using cash or check. It's very common around here, especially in the last four years. But you are not like a typical American, DS. You are careful and mindful of your spending, and you are different enough from other doctors that they did a magazine article about you not being typical of your profession. A lot of that is probably your whole mindset, of not going over budget and paying attention to what is going on. For many people who are not taught to be mindful of their spending my their parents, it is a skill they must learn to acquire. From what I've observed, many people never bother to learn it.

[MonkeyMama]

Originally Posted by LuckyRobin

Sometimes I think using a credit card can put people into a sort of mindless zombie mode.

I think this is an interesting point.

Like Steve, I am not going to go up to the register with more than I really have to spend. BUT, I have been in *mindless zombie* mode and not noticed when something rang up higher than expected, OR when a bagger forgot to scan of my items (just got left behind). I will usually notice by the time I get out to the car, but if I was paying cash, I'd maybe notice when I dug up the cash. (I have a habit of double checking my receipt, immediately - but am often distracted when I am actually at the register).

[disneysteve]

Originally Posted by LuckyRobin

Well, I certainly seem to end up behind a lot of people who do have to put things back and they are almost exclusively using cash or check.

I can understand having to put something back if you are paying cash (and that's all you have with you). If I've only got $20, I can't spend $21. With a check, you can't (or at least shouldn't) write it for more than you have in your account. So I totally understand why that is a powerful budgeting tool. And I'm not saying I've never walked into a store and spent more than I expected to. That would be a lie for sure.

Just tonight, we walked into a new store in our area and my wife bought a pair of shoes. We didn't go in there for shoes. We didn't go in there for anything other than to check the place out. And we went there after getting frozen yogurt at a new place that we had never tried. I had absolutely no idea how much that would cost until we were at the register because it is self-serve and you pay by the weight of your cup.

My point is that how I pay, cash, credit, check or debit is irrelevant to what we spend. For example, I paid cash for the yogurt and my wife charged the shoes. We could have paid cash for both or charged both or used debit for one or both. Regardless, we would have spent exactly the same amount because how we were going to pay had absolutely no bearing on what we bought. I had more than enough cash on me to cover everything. We have more than enough in our checking account to have used a debit card (which I've never used but do have one). And we have more than enough available credit on our cards to charge the purchases.