Spending cash is becoming a lot less common these days. It’s not unusual to see “DEBIT OR CREDIT ONLY” signs at shops or restaurants. Everyone seems to have at least one credit card. Some people have a wallet stuffed with cards from every retailer they ever patronized. That 10% discount for opening a new account can be hard to resist!
While there is no denying that there are benefits to using credit cards responsibly, there are nine smart reasons to consider spending with cash.
Mastering Cash is the First Step to Wise Money Management
1. It’s easier to avoid overspending. You can’t spend cash you don’t have! If you haven’t yet settled on a budgeting method that works for you, relying on cash is your de facto budget.
2. You’ll understand that cash is an asset. Spending cash reinforces that it’s not just a tap or a click when you buy something. You are handing over something valuable, and what you receive in exchange should be worth every penny.
3. Once you carry a balance on your credit card, CONGRATULATIONS! you are officially “in debt.” Debt can be scary. Using cash will encourage you to think carefully about your spending and stick to a budget.
4. Spending cash teaches you how to plan ahead. Instead of focusing on today, you’ll learn to anticipate your “next week” or even “next year” needs. It may be easier to say no to a weekend away with your friends when you visualize buying a car in six months.
5. You’ll avoid paying interest on your purchases. You will pay a lot more for that iPhone than the original retail price if you charge it and spread the payments out over several months. The longer you spread out those payments, the more expensive that iPhone becomes.
6. You won’t pay any late fees. If you miss a credit card payment by one day, you’ll add another $30 or so to next month’s bill as a penalty. And yes, credit card companies do charge interest on top of those late fees. Late payments are also reported to the agencies that monitor your credit.
7. Spending cash teaches you to prioritize needs vs. wants. With limited cash on hand, you’re forced to think carefully about whether your purchases are really necessary. Do you already have enough clothing? Should you bring your own lunch to work?
8. People who regularly use credit cards spend more on individual transactions than cash payers. According to Forbes.com, shoppers often spend more per purchase when they are handing over a card. If you intend to pay for your meal with cash, you’ll think twice about ordering a drink when water will do just fine.
9. You won’t get surprised when the credit card bill hits your in box. You may not be in the habit of collecting receipts (rethink that habit!), you may lose one or two, or your income may be less than expected at times. Getting a bill for purchases that slipped your mind can trigger some serious anxiety.
Spending cash and avoiding credit cards, even if you see them in your future, can help you develop wise spending habits. You’ll develop your own personal standards for needs vs. wants. You’ll learn to plan ahead. Perhaps most importantly, you can avoid the stress that comes with a bill you’re not prepared for.
Coming soon: Learn about the different methods of creating a personal budget so you can choose what works for you.
Additional Resource: Read Katherine Haan’s article on Forbes.com to learn more about why people tend to spend more when they use plastic.
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