Cash vs. Credit: Taking a New Look

While one popular study says that you spend less when you use cash instead of credit, I’ve always experienced the reverse myself.

Cash goes through my hands like water, and I end up with little to no idea of what I bought. But with credit, I can tell you to the penny where my money went. Using credit is also painful to me four times: when I spend the money, when I enter the expenditure in my spreadsheet, when I enter it in Quicken, and when I pay the bill at the end of the month.

(Debit is pretty much on the middle for me. I experience most of the credit benefits, but I then tend to mess up my accounts since I don’t make many debit card purchases.)

Recently though, my non-bill, non-business expenses have gotten a little out of hand. You know, the things that pop up on the spur of the moment like going out to eat or going to the movies.

So I got to thinking…what if I were to only use cash for those particular kinds of expenses, and I were to only get out enough money to pay for what I wanted to do. (No twenties from the ATM for me.)

In that case, I’d have to both plan ahead and really want to go out, because I hate going to the bank with a passion.

The only thing is, I hate going to the bank so much that I’m not sure I really want to give the idea a try. Maybe that means it’d be successful, though.

Have you ever tried something like that? What was your experience like?


  • It almost seems like there’s a point at which I feel goofy using a credit card (sub-$5, for example) and where I start feeling like I’m spending a lot of money if I use cash.

    On that same idea, I think cash “hurts” more to spend because I can see it. But I’m not sure if it really matters as long as you think about the purchase before you make it. So….I guess that puts me in the “I use cash & credit, but force myself to wait for big items” camp?

  • Totally agree with this post. I hook up my bank accounts and credit cards to Everything I buy using my debit/credit card are traceable. That definitely helps me stay close to my budget as much as possible. When I buy things with cash, I do keep the receipt, but it’s quite a pain to keep track of them.

    I use my credit card for almost everything greater than $30 and ALWAYS pay my CC bill in full at the end of the month and not carry any balance forward. The best thing about using credit card is you get to collect points and you can redeem it for whatever you like. Or if you have a rebate rewards card, you’d get 1% of your money back at the end of the year.

    I usually use my debit card for small purchases like fast food or coffee. I have a no-fee chequing account, so I can swipe that debit card as many times as I want without getting some non-sense bank fee :)

    So yea, I barely ever use or carry cash anymore.

  • Glass Is Half

    Yeah completely agree with you … I can never seem to keep cash in my wallet … doesn’t matter how much or how little and even worse I never know where its gone afterwards. For some reason if I don’t have any cash it also seems like I don’t have the urge to spend so generally I get by with a debit card (& credit for emergencies) only … an added plus is it makes my wallet a lot less bulky too!

  • I prefer credit cards because of record keeping and convenience. For me, I find I do not or can not control cash as easily. I think it is the other miscellaneous things that would be bought with cash that throws it off. Without cash, I can not go to those places.

    • Not sure where you’re at, but I noticed that it seems like the further west you go in the US, the more plastic is accepted everywhere. The only place I can think of out here that doesn’t take plastic is the vending machine at work (and even those do take plastic in some places.) Not so much on the east coast.

  • NCN

    We’ve been living w/ out credit cards for more than 6 years now. I use the “envelope system” to manage my cash, use online bill pay for regular bills, and a debit card for other purchases.
    In my opinion, the only way that you’ll find out if you “spend less w/ cash or w/ credit” is to eliminate one of the options, at least for a period of time…
    The reason folks waste their cash is… they have the credit card as a backup. Remove the backup, and suddenly, spending 6 bucks for coffee seems insane…
    (Obviously, I’ve chosen to give up cc permanently, but one could easily do the experiment for a month or so… Put the cards in the back of the wallet, agree not to use them (unless you have an absolute, real, emergency) – and then see if you can live on just the cash that you withdraw. I’d almost bet that the fact that you will not have a cc backup will make it much easier to use cash only…
    Enjoyed the post!

    • You know what’s funny about that is that I didn’t even have a credit card at all for several years after getting out of debt. I’d canceled them all. I was terrified that I wouldn’t have the self-control to stay out of debt if I were to use a credit card, but as it turns out I’ve had no problem with that. But I do think my spur of the moment going out is getting out of hand! Glad you enjoyed the post :)

  • I have put all of my credit cards together with a rubber band. I have credit card debt and don’t intend to ever pull out any of my credit cards. I use my debit card primarily because each month I can pinpoint which transactions ate my money. With cash I don’t have that control unless I track each purchase which can become cumbersome. So using debit card and reviewing bank statement end of the month could help manage your money better. Any thoughts?

    • Oh I love the way you put the “which transactions ate my money” part :)

      I think my real problem is that I feel like I’m spending too much on certain things (like I cringe when I pay $13 for a matinee and a popcorn) because it seems wasteful. But in reality I enjoy it and it’s not a money issue, so maybe instead of idly thinking about ways to artificially enforce self-control, I should either get over it or just stop the spending.

  • A few months ago I got myself a Amex Cashback card and now try to do all my purchases with that card.

    It has not changed my spending habits other than “can I put my purchase on the Amex”.

    The result for me has been great, I now have spent less over the months because of the cashback that I get. For me it is worth it.

    I also try to use my card with a cashback website, so together I get even more money back.

  • For me if I have to pay cash, I’m more conscious of how the money is spent!