Using Cash in a Cashless World
“Just because everything is different doesn’t mean anything has changed.” — Irene Peter
My oldest sister has been married almost twenty years. She brought to the marriage a considerable amount of credit card debt and her husband helped chip away at these balances during their first few years together. She has been debt free ever since. Her secret: paying with cash.
During one recent visit, I noticed she was still using cash to pay for things. She had envelopes labeled for various expenses and an amount set aside in each one. She indicated that when the money is gone, it’s gone and this keeps her on track with her monthly spending.
It seems terribly inconvenient to me. She could use a debit card for the same results… but for some reason the cash method is working for her, so why change it. However, for millions of other Americans — especially younger ones — cash is a thing of the past.
On Sunday, Elizabeth Olson at The New York Times wrote, Who Needs Pocket Change When You’ve Got Plastic? She writes, “Every morning on his way to the Concord, Calif., high school where he teaches physical education and health, John Nunan buys his breakfast. After he swipes his card through the reader, his bank debits the purchase from his account. He often repeats the process for lunch and dinner.”
“Mr. Nunan, 25, is part of a group that some major credit card companies and banks are calling Gen P, or Generation Plastic. It refers to spenders 18 to 25 years old who are increasingly using debit or credit cards, collectively known as payment cards, for nearly every on-the-go purchase.”
“The convenience and speed of such electronic transactions are drawing in users, but there are pitfalls. Those who fail to keep track of their bank balances can quickly fall into a financial danger zone. Ending up in the red can lead to costly overdraft fees.”
“Nevertheless, more consumers ” especially younger ones ” are shunning cash and paper checks almost entirely. Already, a majority of people in their 20s are using payment cards, according to a study conducted last fall by Experian Simmons Research, a market research group in Fort Lauderdale, Fla.”
“While every segment of the population is increasing its use of plastic, this group uses payment cards far more often and is leading a shift away from conventional payment methods. A nationwide survey conducted for Visa in April found that 40 percent of Gen P pays with plastic for purchases of $25 or less at least four times a week.”
Even the good ‘ole fashioned board games (think Monopoly) that taught us as a kids that cash is king thought the “old fashioned” part needed to go as Darren Murph at Engadget reported last year. He writes, “Parker Brothers is phasing out the cash-based version’s funmoney and replacing it with an ‘Electronic Banking’ flavor that could leave Mr. Moneybags turning his pockets inside out as his stash is replaced by a magnetic strip.”
“New kits are completely devoid of the famous multi-colored bills; instead, you’ll find phoney Visa debit cards and a calculator / reader which keeps a running tabulation of your riches — or lack thereof. A deal was struck with Visa to design the mock cards and readers, presumably after surveys showed that 70% of adults used cash less often now than they did a decade ago (no surprise there).”
But going cashless takes discipline. Paula addressed this topic in a previous post. She writes, “Think about it ” how many times have you made a credit card purchase and not even consciously thought about it at all until the bill showed up. Heck, we have so many ‘easy’ automated payment arrangements available to us these days that we can spend our entire monthly income without even taking any action. If you’re not careful, the cumulative effect of this autopilot mode can leave you strapped for cash each month, stuck with mounting debt, and robbing your different savings accounts to transfer money from Peter to pay Paul.”
“Now a note to those of us steeped in the ‘e’ world. You can’t use your technological sophistication as an excuse to duck the reality of the cash method. Your options for sticking to the cash method even with internet purchases and automatic payment plans are to use your debit card or a cash account within Paypal (or something similar like an e-check). Then, you get the benefit of both worlds.”
She concludes, “Try it out for a few months. I guarantee it will allow you to accurately assess, adjust, and stick to your budget.” It worked for my sister twenty years ago… and it’s still her method today!
I use cash only and love it.
I do not have to worry about credit cards bills coming into my mailbox.
I do not have to worry about checking my bank book for the debit cards withdraws/
And best of all I really “feel” the pain when I spend for something that I shouldn’t.
Marie
Once I got my Debit card a few years ago I began to use plastic for almost all purchases. As noted, it takes discipline to keep out of the red and at times I’d find myself playing the post-lag game: gambling that an expense would post after a deposit. These days I’ve got control of the spending habits.
Cash also lets you into the world of discounts at small merchants.
A rule that works for me: If the purchase is less than $100, pay with cash. No exceptions! This was a major milestone for me. There was a time when I was paying out $300 + a month to American Express (The logic I used ,at the time, was that I was not paying any interest given I paid off the bill every month. The lesson learned is that some of those purchases were not within my budget or even necessary. I rarely use that card now – sorry Amex!
Paypal debit card.
Preloading funds means a hard limit for spending, plus I get 1.5% cash back (charter member)
You can even earn a money market return on your funds if you’re willing to give them your socil security number (not me!)
I looove my Paypal debit card – it’s an easy, convenient, and anonymous way to spend.
I used to use the cash method myself and only recently changed over to a credit card. The end result is that now I owe money on the card which I wouldn’t have spent had I used the other system.
To the tune of Mary’s post:
I use plastic only and love it.
I do not have to worry about credit cards bills coming into my mailbox.
I do not have to worry about checking my bank book for the debit cards withdraws.
And best of all I really “feel” the pain when I spend for something that I shouldn’t.
As you can see, unlike Mary, I use plastic for pretty much everything (except those oriental food stores that never seem to take credit cards :).
I do not have to worry about any bills coming into my mailbox because I get them all online, probably faster than it takes me to walk over to my mailbox.
I do not check my bank book ever, once again, I just download and look over my statement once a month.
And I still feel the pain of spending too much on something I shouldn’t have because I do keep track of my purchases and just started using a budgeting tool.
Plastic definitely works for me. I still keep $10-$20 in my wallet just in case (for those once-in-a-while poker games 😉
No more cash in Monopoly? What is the world coming to? How many of us first learned how to spot a cheat when our older siblings were stealing from the bank?!
Harumph. A valuable lesson in reading people has just gone down the tubes. We’re going to raise a generation of kids that aren’t very savvy at spotting a liar or cheat. Or else too stupid to know how not to get caught. (*wink*)
As far as the real topic goes, I’ve slowly been moving towards cash and it does help rein in my spending. Thanks for highlighting Generation P.