Five Reasons to Always Pay with Cash (And Throw Your Credit Cards Away)
November 23, 2007 By Matthew Paulson
Whenever I’m stuck in the line at Wal-Mart, Best Buy or another retail store, it seems that just about everyone is paying with a debit or credit card these days. Plastic is certainly a quick and convenient method to pay for purchases, but I still choose to pay with cash. I still have two credit cards that I charge one or two small items on each month to keep my credit score intact, but the vast majority of purchases that I make are with cash, and here’s why.
You Spend Less – Dunn and Bradstreet did a study a while back showing that the average purchase size on a credit card was over 10% more than the average cash purchase size. That number went up higher in some retail establishments just as fast food restaurants. Whatever the reason, when we pay cash, we end up spending less.
No Finance Charges – A lot of people use their credit cards to pay for small impulsive purchases, and over-time these add up into a big pile of credit card debt if you don’t pay on them every month. If you aren’t under some 0% APY introductory rate and just pay the minimum payments, you could easily pay for your purchase two or three times because of the finance charges that you’ll have.
No Overdraft Fees – It can be very difficult to keep track of one’s checking account with all sorts of bills that come each month, checks you forgot you wrote, and automatic drafts that come out each month. If you don’t keep a good padding of cash in there, it’s very easy to lose track of how much money you have in there and be spending money you don’t technically have. Once $20 overdraft fees start coming in left and right, it begins to hurt!
No Going Over Budget – The cool thing about paying with cash is that you can never accidentally pay too much. At the beginning of the month you can take out exactly how much you plan on spending for that month and nothing more. If you don’t carry your credit and debit cards around with you, you can never spend more than you had hoped to at the beginning of the month.
Get a Deal – If you pay for larger ticket items with cash, you can often get a great deal by paying for cash on the spot. There’s something powerful about cash when it comes to negotiation and it will be very hard for a sales person let you walk out the door when you have hundred dollar bills in your hand.
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November 23rd, 2007 at 2:39 pm
Amen! Cash is always welcome. And when it’s a wad of bills in your wallet, it’s a lot more tangible. I try to do this now as well.
November 24th, 2007 at 4:07 am
Thanks for dropping by and leaving a comment on my post about why I use credit cards.
This is an interesting counterpoint. While I’d have to agree that only paying cash is the safest way to guarantee that you don’t spend more than you have, I still have a hard time believing that completely abstaining from credit cards would solve everyone’s debt problems. It’s like abstinence-only sex ed — great in theory, but it doesn’t really work in practice.
That’s why even though I use credit cards for almost everything, I wouldn’t recommend it for everyone. I also wouldn’t recommend always paying with cash for everyone. Like I mentioned in my blog, I think the choice is a personal decision that requires serious self evaluation. This means being honest with yourself about your spending habits and knowing the potential risks of using credit cards.
November 25th, 2007 at 6:16 pm
I agree with ‘Broke Grad Student’. I use my credit card for everything; use credit cards that give me cash back for everything I buy. One can overspend using a credit card, I agree, but it is a matter a personal discipline and training to refrain from doing so.
Credit cards are continent method of payment and gives a itemized list of all the charges made on it in the form of a monthly statement.
Here is what I do:
1. Insist that the credit card company send me a statement via mail; no electronic statements. E-statements get lost in the tons of junk E-mails.
2. When I get my paper statement for the three credit cards I use, I go through all the line items. Divide my expenses into 10 categories Robert Allen talks about in his book Multiple Streams of Income.
3. Since I like graphs and charts, I plot the total of each of these categories using a bar graph.
4. I know some would consider this to be tedious but I take no more that half hour in going through all the three credit card statements I get, categorizing then, adding each of the categories together and plotting them using a bar graph.
5. In addition to this I evaluate one item in the ‘Fun Category’ that could have been avoided.
Doing these few vital steps, gives me a greater control on my expenses that I make using credit cards.
February 3rd, 2008 at 1:34 am
I myself like using cash instead of credit cards. It saves you time in checking your credit card statements. It just simplifies life in a little way.
I try to manage my money by withdrawing cash weekly and divide (budget) it in categories. I noticed that my spending habits have improved. I don’t worry about how much I will be paying my credit card anymore.
Another reason why cash is better: It lessens impulsive buying. I have this problem for a while and whenever I go out and get bored, I just buy anything just for the sake of it. Now since I don’t bring my credit cards with me anymore, it takes away the feeling that I can afford things I really can’t. I actually feel much better going home without the item I felt like buying.