Conscious Spending - Credit Card vs. Cash

[landon.bruno]

Credit card is better since we don’t have to go with cash everywhere. I would say debit cards are better.

[crazyskunk82]

What alarms me is when people say that if they use a credit card, they don't have to worry about having enough money. Yeah maybe you can afford to charge things you don't have the cash for, but things happen. What if your income needs to go to another unexpected expense that month and your credit card balance sticks? In my opinion, for the majority of people, who live paycheck-to-paycheck,credit cards are dangerous.

Cash is a better way to operate if you live week to week. It also makes you think about how much you really need that coffee, or that magazine.

-Andy
Rise The Wiser - A blog about breaking free of debt and learning financial wisdom

[dawnwes]

I really do follow more of a Dave Ramsey approach to many things, but I am finding cash to be difficult to track.

The envelope method scares me really as I have no intent on carrying around a lot of cash. I also found this past weekend when I started with $200 in my wallet, that I couldn't rememeber exactly what I spent on what. I know I did a grocery trip, went yard sale-ing, went out to eat, and stopped at the scout store for a few items. I know the $200 was NOT in my wallet when I got home!

I use a virtual envelope method (YNAB) and it works much better for me. I can track everything based on the statement IF I forget the exact amount. For example, I try really hard to track the exact amount for gas. When I pump gas I never write it down immediately and DH forgets to tell me when he gets gas. So, I look at the statement every few days online and write it in that way. Works much better.

The problem with credit cards comes when you don't keep track of what you have spent. For me, this has be at least weekly, preferably daily tracking.

Dawn

[disneysteve]

Cash is a better way to operate if you live week to week.

I think there is truth to this. Until you have learned to live below your means and not overspend, credit cards probably should be avoided because you don't have the financial discipline to use them responsibly. If you are living paycheck to paycheck, spending every penny when it comes in, you don't need a piece of plastic that will let you spend even more than you have.

The problem with credit cards comes when you don't keep track of what you have spent.

Exactly. I hate to sound like a broken record (what an outdated expression), but if you are responsible with your spending, how you pay is irrelevant.

[wincrasher]

As I've said before, I'm not much of a budgetter. I know what I have for bills each month. My food, gas and utilities are just what they are, but I know what they consistently run. I try not to just waste money (like going out to eat all the time). But there is the occasional purchase - things I want or need - I just look for bargains on those. So cash or credit really doesn't matter to me. I do think it's important to have "walkin around money". I keep a few hundred in my wallet just to waste on stuff I want/impulses. I guess you could argue that it is in my informal budget, because that's what I always do. Generally, I don't spend, in total, more than 30% of what I make.

The other day I went into Costco just to see what they had that week. Wasn't planning to buy anything. They had a great deal on shirts and cargo shorts. I bought about $500 worth because alot of my summer clothes are kinda ratty, these prices were a great value, and they should last a few seasons. So would I have bought these items if I was cash only? If that means actual bills in the wallet, then no. If it means debit card, then yes. But I put it on my Amex that I will pay in full at the end of the month. And now I have points to spend in the Amazon store for other stuff I need, like the coffee I order each month.

My BIL can't go to the grocery without being on a cash basis. They have to be on the envelop system for this, or they'd have a cart with $300 worth of stuff in it, instead of their $50 budget.

All that said, it's statistically proved people are more willing to spend, especially unplanned purchases, when it's on credit. If you are on a budget, especially a tight one, you need every tool necessary to prevent "unplanned" purchases. I'd say that for the vast majority of people, that tool is cash.

[thesmartnickel]

I completely agree with the original post along with a lot of responses. I find that its a shame that not enough consumers spend with their credit card like cash and just take advantage of the free cash back. But then again, if everyone was like me, credit card companies wouldn't make any money and stop offering such reward programs.

[couchrobt]

Who wouldn't like more with a creditcard than money spent. Aside from, it is less difficult to track your spendings with you having a bank card. With that said, in case you develop a conscious shelling out plan it is possible to spend funds freely without having feeling negative about this or worrying should you have sufficient spendings or you over-spent.

[jerrycates]

Pay in cash if you have the cash. Holding onto the cash on hand will not make it grow and certainly will not pay debts. Sooner of later too, you will just notice that all cash money were used up.

[dczech09]

I remember using my debit card for everything. I would have my food and gasoline money in the bank and use my debit card for purchases; cash on hand was play money.

I would go to the gas station, get gas, and when I used a card it was easier to go ahead and grab a bottle of pop or something. Now that I use cash, I think twice about picking up a bottle of pop.

I do think I tend to spend more carelessly when I have cash. For instance, I am more likely to go to a Subway for lunch when I have cash on hand.

Ultimately though, I don't spend any less now that I use cash for everything. I spend the same amount because that is what is in my budget. I've mastered my budget to the point that I spend what I have and don't really run into problems.

I get paid again tomorrow; perhaps I'll try the debit card or maybe even the credit card method for the next two weeks and see how this goes. We'll see if there is any behavior changes and if my finances go differently.

I really think it just comes down to trial and error and also testing what works best. I liked the point that someone living paycheck to paycheck or someone who uses CCs poorly should avoid them all together; of course thats just common sense though

[naomibatac]

credit card vs. cash

I agree with some of the viewers that the problem is not whether you use credit card or cash for your expenditures. It is a matter of responsibility and attitude. It is a good thing if everybody would be like some of you who have the right attitude and responsibility of spending only what you can afford to pay. But, we must admit that parents nowadays due to overloaded work both at home and in the offices failed to teach their children how to be responsible in handling budget and how to have the right attitude when it comes to spending.

I myself, even how much I tried to record how much money I have or how much I can spend; there are still instances that I fail. However, if you have the right attitude and responsibility, the failures are few and manageable.

Bye the way, because of those few misses in going overboard, I now use my credit card for purchases that I can fully pay on due dates.

[BMEPhDinCO]

Interesting discussion and povs!

I know that when I was in college, we got $500 or something every semester loaded onto our student ID cards to spend on campus....we called this "play money" or "not real money" even though it was money because we could only spend it in certain places.

I think that some people consider CC to be "not real money" since they don't SEE it and they don't spend it all at once (ie, people who make a minimum payment).

I'm personally of two minds - I love my CC and I use them a lot, except for joint fun money for the month. We use cash for that, since when we used a CC, it was too easy to be tempted to "borrow" from the next month for that one more fun thing that's less than $10.... now, when the cash is gone, poof, no more spending!

However, I like the tracking of the CC - I can go online and see what we spent where and when and so forth - with the cash, we get confused and forget where we spent it. Sometimes, I also wonder if I actually gave someone a $10 when I meant to give them a $1 since the money goes so fast.

It's also a matter of budgeting well - I never spend on a CC what I don't already have in an account somewhere - and if that's something one can do, then one should get a CC, otherwise one should look into cash envelopes or similar.

Thus, I like using CC more for most reasons, but cash has it's place as well and for people who really can't stop, cash is the better option.

Debit cards are electronic cash to me, btw, so I treat them as such.

[photo]

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.

The financially conscious part is crucial. I remember a friend, some years back, who wasn't very good with money. When she and her husband tried to take control of their finances, they started to tell their children that they couldn't buy certain items because they didn't have the money, to which the kids replied, "Just use your card, then."

I rarely use cash (farmer's market is probably my biggest purchase), but I would argue that children and teenagers should use cash so that they have a more concrete idea of what they have in their hands. When it's gone, it's gone.

But for adults, if every purchase (necessities or whimsicals) is a conscious decision, then the method of payment doesn't matter. It's when people mindlessly pick up something and slap down a card that it becomes a problem. And like nearly everything else in life, it's all a matter of how we think and process information. We tend to think that others view money just like we do, but that clearly isn't the case.