Cash vs Plastic: Which do YOU spend more with?
August 21st, 2007 by Ana
Y’all should know by now I am a Dave Ramsey follwer if you’ve read more than one post on this blog. One of the few areas I disagree with Dave is in his assertation that people spend more when they use plastic (aka debit or credit cards) than when they spend cash. Nick over at Punny Money says this doesn’t apply to him, although his reasons are very different from mine.
My problem with using cash (and Dave Ramsey’s cash envelope system) is that I don’t tend to feel ownership of cash. It’s called currency because it is supposed to flow! LOL This probably goes way back to when I was twelve and got a newspaper route, way back in the dark ages when paper carriers knocked on the door and collected the money. I handled lots of cash, usually ones and fives, but I always figured it really wasn’t mine until I had paid my newspaper bill for the entire route. So my first job as a kid was handling cash that wasn’t really mine.
After the paper route, I got a job as a car hop at the root beer stand down the street from me. Again, I carried cash to make change since this was still the dark ages (well, maybe early Rennaisance) and the stand didn’t take plastic. In the fall I then took a job working inside a delivery pizza place that didn’t accept plastic either, although we did take checks. I answered the phones, made pizzas, watched the oven, and -You guessed it!- ran the register.
In fact, since I heeded my mother’s advice and have never worked retail, I never had to learn how to process a credit card transaction until this spring when I became a pizza delivery driver at Domino’s. I still handle quite a bit of cash every night I work, simply because most people still use it. So I still have this disconnect between cash and pain, especially when I can and have handled over $400 in cash in one single shift on a busy Friday night delivering pizzas. Somewhere in the back of my mind is this little voice that says, “It’s not mine,” when I do handle cash…even when it actually IS mine!
So last month I gave away my delux envelope system to a coworker I have introduced to Dave Ramsey, after I showed her how to make a proper budget that will work. She prefers to handle cash rather than use a debit card (she doesn’t believe in credit cards even without Dave Ramsey!) so the envelopes were the perfect gift for her. Honestly, they were just sitting on my computer desk anyway. I use my debit card and keep a cushion in my account as a “baby baby emergency fund” since that number on the screen (my account) is what I truly identify with…THAT is actually MY money! Do I spend more this way? I don’t believe so, because cash has always burned a hole in my pocket … if I have it I will spend it. So, what’s YOUR take on the plastic vs cash debate?
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August 21st, 2007 at 1:05 pm
It’s not really Dave’s assertion, it’s the result of studies:
http://www.associatedcontent.com/article/142336/do_we_really_spend_more_with_credit.html
I know in my experience I spend more with plastic because the pain doesn’t register.
There’s also the problem that when you use your debit card, you tend to lose a few transactions here and there.
I’ll take cash any day
August 21st, 2007 at 1:42 pm
Mike, I actually check my debit card account at least once a day, plus it shows pending transactions before I even get hme. But that link is very fascinating, thank you for posting it! It does make sense…and is backed up by McDonalds adding the credit card machines LOL
August 22nd, 2007 at 4:43 am
I do almost everything with plastic so I can get the cash back rewards. For a long time I used my debit card almost exclusively (USAA has a cash back debit card, but it is only 0.5%). Now, I use a 1% cash back credit card that I pay off in full every month. I prefer the convenience of using plastic over the hassle of frequently pulling out cash. I don’t think my spending habits are really any different.
August 22nd, 2007 at 7:43 am
Patrick, unless your monthly budget is in the five figures regularly, that 0.5% difference between the two cards will not net you much at all. If you ARE military, chances are very high you aren’t handling five figures before the decimal place every month (I should know…was army myself and hubby is still active duty army too!) If you’ve read more than two posts on my blog, you know I am very much against credit cards.
You may have the discipline to pay the balance off in full every month, but what will happen when you PCS and the finance office at your new duty station messes up your pay? We were taught as privates that the single biggest lie in the army is “Your pay will be straight next month.”
I view credit card the same way I view venomous snakes: maybe not evil but they will bite and it will hurt when they do. It’s just the nature of the beast. To quote that wise elder Yoda from The Empire Strikes Back: “That way leads to the Dark Side of the Force.”
August 22nd, 2007 at 6:39 pm
Hi Ana,
I am prior military (I separated about 1.5 yrs ago). You’re right, the 0.5% difference is not much at all, and my budget is definitely not that five figures!
I understand you are against credit cards, as are many people. I use them because they have added protection against fraud vs. debit cards, and I can pay it all off at the end of the month instead of having the money come out gradually. I never use the card if I don’t have enough to pay it off in cash from my account, and I have not carried a balance since 1998, when I only did so to create a little credit history.
I realize I am in the minority as far as credit card users go, but I wouldn’t use them if I wasn’t positive about my financial situation. I appreciate your goal to get out of debt and help other’s do the same. It’s encouraging to see you make progress!
November 2nd, 2007 at 4:45 am
Good article, I linked to you from my blog
January 21st, 2008 at 10:19 pm
Hey DFR,
I’m slowly working my way through your archives and just wanted to add my two cents to this. As a college student, I have two credit cards (one I with my main bank and one I got for the rewards). I had to stop using both of my credit cards because it was just so easy to think, “Oh, I’m getting points for this.” I wasn’t able to pay off the balance in full each month, so I switched back to a combination of debit and cash. Cash, for me personally, is PAINFUL to part with, so I almost always spend less when I pay in cash. I check my debit card balance every day, also, but that still makes me think, “Well, I’ve got plenty of money to cover this right now,” without thinking “Oh, I have to pay for groceries next week.”
October 6th, 2008 at 5:09 am
I prefer cash. Though i use debit card.
November 3rd, 2008 at 6:47 am
Wow, it’s a great post, how interesting topic, i prefer cash too…