Conscious Spending - Credit Card vs. Cash

[disneysteve]

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]

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]

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]

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.

[maat55]

Food for thought.

http://web.mit.edu/simester/Public/Papers/Alwaysleavehome.pdf

[SFA]

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.

I'm happy this post got so much feedback; my point was the same as Steve's here. Cash and credit cards are just a form of payment. My point is that I don't understand people (who are financially conscious) arguing that cash is better than credit. If you are financially conscious it doesn't matter what form of payment you use, you know how much you have to spend. In that case.. it is obvious credit is better (rewards, building credit score, etc).

[DebbieL]

I think it has been pretty well studied and shown that we DO tend to spend less when using cash. I am the most financially responsible person you could want to meet, and I find that it is much harder to part with cold, hard cash out of my hand than signing a slip of paper (and usually you don't even have to do that anymore). When using credit cards I always paid them in full, etc. However, since moving (mostly) to a cash system in January I spend so much less money. I just don't like to part with the cash, lol. Makes me think more whether I really need/want the purchase. Yes, I can afford things, but that doesn't mean I should buy them. With the card, I buy more. I don't spend myself into uncontrolled debt, but I definitely don't save as much when using credit cards.

[CreditCards.org]

Have you heard the latest that many consumers allow credit card rewards to expire now?

[disneysteve]

I find that it is much harder to part with cold, hard cash out of my hand than signing a slip of paper (and usually you don't even have to do that anymore).

Perhaps this is where I differ. To me, cash is almost play money. I guess I don't mentally assign the same value to the cash in my wallet as to the use of my credit card. The credit card has a paper trail, an electronic record, accountability - there will be a bill to pay when I use it. Cash is just cash. When it's gone, it's gone.

When I do my financial spreadsheet, I never include cash on hand among our assets, including our emergency cash stash. Once it is out of our account, I no longer count it. I know when I use my credit card, there will be a bill to pay that will impact our account balance. Spending the cash already on hand has no direct effect on our account balance.

I've mentioned plenty of times that my wife and I like to go to the casino (I was there just 2 days ago). If I had to swipe my credit card each time I sat down at a blackjack table, I'm sure I wouldn't play nearly as much or as often but sitting down and handing the dealer a few hundred dollars cash doesn't bother me at all.

I guess that is part of why using a credit card is much better for me.

[jerrycates]

As far as I know I would prefer to pay in cash if I have it. I try to stay away from all those plastic money if I can.

[clintdavis]

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.

Why do you think cruise ships give you those little cards to swipe and don't take cash for anything on board. They know how this game works...if you swipe the card instead of using cash/check, you are further removed from the actual cash transaction. That's exactly the way a credit card works. Again...can you use them responsibly? Yes. You can use cocaine responsibly too...but most users don't. That's a pretty foolish argument to make. Just because you can use something responsibly, and some do use something responsibly, doesn't mean that it is inherently a good idea.

[disneysteve]

You can use cocaine responsibly too...but most users don't. That's a pretty foolish argument to make. Just because you can use something responsibly, and some do use something responsibly, doesn't mean that it is inherently a good idea.

Sorry but this is a faulty argument.

1. There is no such thing as responsible cocaine use IMO.

2. I can think of plenty of things that can be use responsibly or irresponsibly. That doesn't mean those things shouldn't be used at all just because some people can't manage them. Cars come to mind. So do computers, cell phones, alcohol, guns... The problem isn't the thing. The problem is the person using the thing.

I totally agree, 100%, that lots of people misuse credit cards. I'm not arguing that point at all. I do not agree that the answer to that is to avoid credit card use entirely.

[riverwed070707]

This whole post has been very enlightening to me because I feel very different. I definitely agree that electronic spending is easier to track, but not only do I not spend more when I have a credit card, I tend to spend more carelessly with cash. We *never* carry cash except for our monthly fun money because with that it's easier to enforce the "once it's gone, it's gone" rule. If I carried cash for all my purchases, I would without question spend more than if I were purchasing with a card. The little purchases woudl get me -- when I don't have cash, i never stop for a morning coffee, go out to lunch, grab a snack from the vending machine at work (even though it takes cards), etc. When I do have cash, I always rationalize that it isn't hitting my budget so its NBD. The fact that it is hard to track makes me spend more of it, not less.

[BuckyBadger]

I also spend cash more friviously than I would use my credit card. If I'm thirsty and pass a soda machine and have a buck in my pocket? I'll spend it. If all I have is my CC? No soda for me. I'll spend a buck here or there in cash easily, but I wouldn't swipe my card for a dollar or two.