Thursday, February 24, 2011

Cash vs Debit

Debt Ninja at Punch Debt in the Face had a very interesting post that put into words something that I have thought about myself for quite some time. Contrary to what a lot of pf experts (Gail Vaz-Oxlade, Dave Ramsey, etc) think, I find I spend less when I spend using debit or credit than with cash.

I will, with out a doubt, spend $200 in cash faster than with my debit card. I'm not 100% sure why I'm wired this way. I do remember my Mom saying that cash "burns a hole in my pocket" I certainly have memories of going out and spending cash given to me as a child as fast as possible before it went away or was stolen by my younger brother.

I think it may be that I am more conscious of when I have cash then the fact that I have money in my bank account. Don't get me wrong, I know exactly how much I have in my bank account right now ($127.45 - without checking!) but I'm not as conscious of it because it isn't physically there. I am a visual person. I need to see something in front of me to know that its there (or to understand a concept I've never learned before) so that may be a part of the reason too.

Also, when I don't have cash I don't make as many small frivolous purchases. One of the reasons why I've had a lot more no spend days recently is that I don't have cash to go to the convenience store (I refuse to pay a surcharge to use debit at a convenience store!) so no little purchases that would make the difference between a no spend day and a $1.50 or $2.00 spent day. Those little purchases add up!

I also track my purchases more effectively and have more of an idea of when I need to "stop" spending because my bank account is low or I've already spend X amount of dollars on stuff this month. I've only recently started tracking cash spending too and since I don't want to track a lot of purchases, spending no cash most days appeals to my lazy side ;)

I think what we all have to do is find out what works best for us and perfect this method by tracking and budgeting. I think this is what works best for me, despite what others may say.

How about you, do you spend more when you're using cash vs debit/credit? Do you think that in general people spend more when they use plastic?

TTFN, Morgaine.


  1. If the cash bills are in $100's, I don't spend them. The lower amounts I spend like crazy. I tend to spend less when I use the debit card, but I refuse to use it on low amounts.

    However, my husband is opposite. So, we compromised and have a few things cash only, but the majority we use with the debit card.

    At this point, we are not using any credit cards.

  2. I agree, I won't spend higher bills unless I have larger purchases. I even have a hard time breaking $20 for purchases under $5.

    At this point I am only using my credit card for something that I can only purchase (or would pay a lot less for) on the internet. Most places still don't take debit online. I am trying to make sure that I can fit these purchases into my budget and pay for them in cash right away so that I'm not doing the 2 steps forward 1 step back anymore. Its certainly one of my hardest challenges, but I am working on it :)