"A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain." - Mark Twain

Cash or Debit Card?

By , September 27th, 2008 | 22 Comments »

cash or debitHow does using cash or a debit card influence our spending?

About a month ago, I watched a video on Yahoo about an ordinary couple who were challenged to use cash for everything they bought for one week. The idea was to find out if they would spend less when using actual paper money.

How do you feel about using cash versus using a debit card? If someone said you could have your choice of ten $100 bills or a debit card with $1000, which would you choose?

Imagine the feel and the smell of all those greenbacks. Now mentally lay each $100 out on the counter and savor the idea that they are all yours. Yours to spend however you want.

Now take a look at that debit card. Cold hard plastic. It just sits there staring back at you.

Cash is governed by emotion. You can count it, caress it, smell it, spend it, save it or savor it. You can flaunt it, hide it, bank it, give it or burn it. The point is that we have an emotional attachment to cold, green cash. Think about how you feel when your wallet is full. You have to admit to feeling a sense of accomplishment and pride, an inflated sense of well being, when you have a fistful of bills.

A debit card, though worth the same as the cash, doesn’t elicit the same response. We know the money is there. We know the money is ours to spend or do with as we wish, but there is a distance, a lack of emotion.

Who hasn’t kept a $100 bill in their wallet for weeks at a time, just because they were reluctant to break it? Why? Because once it is changed to smaller bills, it’s gone. Would you be so worried about using the last $100 on your debit card? No, I don’t think so. Using a debit card causes no emotional reaction.

Let’s suppose you are trying to stay on a budget or keep your spending under control. You go into the local, buy everything you need here, department store. You have a certain amount of money designated to spend on only what you need. If you have a set amount of cash in your wallet, you will be very careful not to spend over that amount. If you do, you know you won’t have the money to pay for it, and it’s embarrassing to have to put something back.

If you have a set amount of cash in mind and you plan on using your debit card, you wouldn’t have to be so careful. You know there is money in the account to cover anything extra you might want. So those little sales that the store puts up to tempt you, do just that. Before you know it, your buggy is full and you’ve blown the budget yet again.

Remember the ordinary couple who took the challenge to use cash for a week? They found it inconvenient to use cash for everything, especially at the gas station. They also saved a considerable amount of the good green stuff and that was a surprise to them. They didn’t realize how easy it was to swipe a debit card and go on with little thought to the money spent. Nor did they expect to have to plan for every dollar when they used cash.

Perhaps the question is, can using cash help you save money?

Then there is always the question about credit cards that actually give you cash back (you can find out about them on sites like http://www.creditcardsguidance.com/), but that is a discussion for another time…

Image courtesy of Joshua Davis (jdavis.info)

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  • Kenny says:

    Excluding bills and gas, we use cash for everything. It’s not inconvenient at all. I’d actually say it’s nice to flash the cash.

  • Stock Research says:

    Great article. Something I’ve believed for a long time. Using a credit card especially, the purchases seem less real until it’s time to pay the bill and reconcile the checkbook.

  • Julie says:

    I have never used a debit card in my life and don’t plan to. I use cash for almost everything except the bills I pay by check.

  • Annie Jones says:

    I commented on this somewhere else recently. This theory doesn’t hold true for me.

    Cash runs through my hands like water, and since I can’t always get a receipt with a cash purchase (such as at a garage sale or if I buy a soda from a vending machine) I can easily lose track of where my money goes.

    Using a credit card makes me feel nervous and guilty, so I won’t use one unless it’s absolutely necessary, and spend as little as possible when I do.

    Debit cards are the best for me. I always get a receipt with my purchase, I log all of them into our budget program, and then double check them with our bank statement online.

    I also use checks, but only for things like doctor bills where I don’t have a regular monthly payment. All regular bills get paid online.

  • Monkey Mama says:

    Cash is dirty and hard to keep track of. Not a fan!

    Of course, I am sure the masses do better with cash than plastic, but I think it makes little difference to those who can stick to a budget and manage their finances well. With cash I always forget to write something down, or it is easier to lose. I personally don’t care much for cash. My spending is way improved with plastic because I can keep track of every penny spent with little effort.

  • Monkey Mama says:

    P.S. I actually prefer credit cards. The 10% – 30% interest rates keep me from even considering spending one more dime than I have in the bank. It’s pretty good motivation for me; not sure why not for others.

  • aa says:

    Using cash helps people save money? How about carrying no cash, you can’t spend at all!

  • Bimmer says:

    What happens on your carefully planned shopping trip when you remember an item you need to get, but did not bring enough cash to cover the cost of that item? The rest of your expenditures on the trip are necessities, so you cannot eliminate another item. What do you do? If you pack extra cash just in case, you are in the same boat as a debit/credit card person (easier to spend more than you should).

  • baselle says:

    I love cash, but then again, I’m from a primitive tribe. What I don’t understand is anyone could believe that somehow plastic makes the transactions go faster…

    give cashier card
    card swiped
    receipt printed
    add tip, total
    grab copy of receipt

    give cashier cash
    get change
    get receipt

  • kemkem says:

    I am not surprised that people spend more with the debit card. It doesn’t seem like it’s “real” money. I am one of the dying breed who still uses an ATM card. I had to threaten to close my account in order to keep getting renewals. They would automatically send me a debit card and l would go in and demand an ATM card. It is more real to me when l have to put my pin # in. I know it’s coming straight from my wallet so to speak and it makes me more careful. The banks hate ATM cards because they can’t charge the establishments the 3-5% processing fee. I use credit cards for dining out.

  • Joel says:

    I prefer a credit card over a debit card, credit card gives a 25 day grace perion on payment and there are some point incentives also. I pay the bill in full each month and never carry a balance. I would never use credit if I had to pay intrest charge.
    I have never used a debit card because it is more troublesom to keep a tally on spending.

  • justme says:

    to # 8 no matter how bad you need/want something if you cannot aford it you cannot buy it plain and simple budget idea

    as for peopel who lose cash and cannot control their spending with cash that strikes me as a flaw I would choose to correct

  • justme says:

    #9 i am with you I hate being stuck behind people using plastic it is so slow;-)

  • Suzy says:

    About a year ago, my husband and I decided to use cash for everything. We shredded our debit cards after paying $38.89 for a cup of coffee ($37.00 overdraft fee + $1.89 for coffee). We were both taking money out of the same account and weren’t writing all of the purchases down. Since we have started using cash only, we have trained ourselves to spend more thoughtfully and now we only pay $1.89 for coffee in the morning! I would suggest to ANYONE to try this for a week or a month. We’re very pleased with our results.

  • rob says:

    Using a debit card over the last few years instead of a credit card has allowed me to keep my spending from getting out of hand. Using the debit, even though it may not have the same level of protection as a credit card, was the single best thing I could have done to avoid paying outlandish credit card fees.

  • Carol says:

    I’m torn on this one. I really rely on my debit card and hardly ever use cash. I don’t feel safe using it. However, one big disadvantage of our debit card is that since my husband and I have a joint account, we are both spending out of, it means we both have virtually unlimited access to the bank account. We often don’t know how much the other has spent until we turn in the receipts and then it’s “whoa nelly”! With a cash based envelope system, each person has a set budget amount to spend and you can keep a better handle on your money.

  • Vik says:

    Cash is pointless as are debit cards. If you are responsible, get a credit card that rewards you.

    In one year I have been rewarded 4 round trip tickets.

    Keep the cash somewhere where you earn interest. If you use a card (of any kind) it is easier to track your expenses. I use expenseview.com for every transaction.

    The key to be smart with your money is tracking every transaction…

    • Richard says:

      Be responsible. Try to live without a credit card for one month. If you have money in your account. Why do you need those depressing rewards? “oh thank you for paying my huge annual fee now i will give you a pittance of a prize for being a chump” Just saying 🙂

  • rob says:

    Thats your opinion I guess but using a debit card for me is not pointless at all. Quite the contrary.

  • Gene says:



    1) Convenient, after you buy things, if you are a frugal shopper, wads of bills and coins begin clogging up your pockets and in my case they fall out of my pants. I loose small things out of my pockets easily.

    2) Provides a record online that I can access via internet or your smartphone.

    3) usually free to use, and lots of places will let you use your card for little purchases, even though it costs them.

    4) Takes money out of my account immediately. Checks float out there and complicate my actual balance.

    5) Can be used to get cash. The grocery store I use lets you get cash without penalty.

    6) If you are on a trip and you buy alot of things, which cashier wants to take the time to count out all these loads of coins and small bills that you have been accumulating everytime you buy something with a $20 or a $50 or a $100 bill?


    1) Business like low priced gas stations and small business must charge for the use of the card… SO..to avoid these pesky fees having some cash on hand helps you to save money.

    2) If you have a credit/debt card and it is stolen you need to be able to call your bank SOON and cancel it before the crook finds a lame clerk somewhere who doesn’t check their ID on a credit purchase.

    3) Lots of small business still refuse to use debt cards.


    I believe having a debt card on you is the best AND have a couple of $20s on your person somewhere for gas, debt fee places and cash only businesses.

  • Pat Jones says:

    I love pre-paid debit cards. I just swipe the card and sign the receipt. Visa has a 0% liability for fraudulent charges made with their cards.

  • Richard says:

    I use my debit card. Its also a visa card. No need for credit thank you. Cash is just not the same anymore. Either some places dont take cash or dont take debit. Or vice versa. So i just normally carry cash with me and have my debit as an extra layer of security. Dont need the credit card that way. Credit card is my emergency fund. Credit card not nessessary if i have my visa debit.


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