Turning Spenders into Savers: The Benefits to Paying in Cash
Have you seen the new Visa Check Card commercial?
It features a lunch room cafeteria in full swing, with dozens of people ordering, cooking, walking and paying ‘“ all perfectly synchronized. While busy, cheery music plays in the background, the whole cafeteria is engaging in this well-coordinated routine; seen from above it looks like a Busby Berkeley number. All is well until the dreaded cash guy arrives. While everyone else swipes their Visa Check Card for payment, the cash guy has to pull out his wallet, count out bills, and accept change. The music slows, and the perfect routine implodes, with people bumping into one another, drinks spilling, etc. The tag line implies that using cash will just slow you down. In many ways, that is true and I actually think it is inadvertently a great endorsement for using cash. Little does Visa know!
Think about it: with a credit/debit card, you are much more blinded to the total cost of your purchase than with cash. Surely debit/credit cards are faster than cash, but in our current economic situation maybe what we need to adopt is a slower, more conscientious approach to spending? I know my personal transition from using credit/debit cards to cash helped guide me toward being a better saver. Sometimes, slower IS better. Here are 4 reasons why using cash is better for your wallet.
1. Pre-set limits to spending: Especially for smaller purchases, cash gives you a level of control that is difficult for spenders to instill themselves with a credit/debit card. For example, I used to use my debit card to pay for work-week lunches. Often I would find myself at the register with a $15 charge, and once, at Whole Foods (FYI: the Whole Foods cafeteria is amazing, but pay-per-pound, so also confusing and expensive!) my bowl of food rang up to $23! Since I was using my debit card to pay, a couple of extra dollars never made much of a difference. But now I cap myself at $10 per lunch, and only take that amount in cash with me. This caused me to be more aware of prices as I’m going along, and forces me to stick to my budget. Some people can do this without using cash, but using cash and leaving all other methods of payment at home gives a spender like me the willpower I don’t normally have.
2. Counting out bills makes it harder to spend them: It is a proven fact that counting out bills to spend always results in less spending. I’m not sure why this is, but I’m willing to guess that when we actually see how much money those new boots are costing us, we’re much more likely to re-consider our purchase. Using cash gives you a better sense of what you are spending and puts prices into real terms, giving us a much needed perspective on cost.
3. Saving the change: Some new-fangled check cards do this now, but there is really nothing more satisfying than carrying a years’ worth of change to the bank in exchange for enough cash to go out to dinner. Using cash for all your purchases allows you put aside this ‘œextra’ money without much sacrifice. Just by saving your coins for a couple of months, you can build up a nice rainy-day fund. If you save your coins for years, like my brother does, you can even go on vacation using only spare change! One of the easiest ways to go from being a spender to a saver is to start saving your change. And the best way to get more change is to start using cash!
4. Using cash allows you to take advantage of hidden discounts: Did you know that stores and restaurants have to pay a fee to the credit card companies every time they process a credit card transaction? This is why many smaller stores and restaurants are cash-only, or have minimums for credit-card purchases. By frequenting cash-only places you are taking advantage of lower prices across the board, because of lower operating costs. Similarly, you can also take advantage of cash ‘œdiscounts’ at places that have credit card minimums. How many times did I get suckered into buy something I didn’t need or want in order to make a credit card minimum? By using cash you can bypass the need to purchase something for no reason, and short-circuit your spender impulses.
Using cash for the majority of my purchases has certainly slowed me down a bit, but that’s what I wanted. I am no longer as impulsive or careless when I make purchases. Having to be deliberate and thoughtful because I was using cash made me more aware of my spending habits. It was a major step in turning this spender into a saver! Do you find using cash is better for you too? What are some tips you have about when to use/not use cash?
I find it a lot harder to keep track of where my money is going when I spend cash. I just recently got a job where I get tips, and it’s much easier for me to spend the cash (especially all these ones taking up too much space in my wallet!) than it is for me to put something on a card. When I use my debit or credit cards, I can track spending much more easily.
This is totally true!!!!!!!!! Using cash has made me save a lot more money because I am less apt to break a $20 or a $50.
I guess all my years bartending taught me how to budget money a lot faster than my friends who got paid bi-weekly by check. I had to plot out my earnings every work shift- talk about slowing down the process! Then I would bank it, charge everything on a rewards card, and pay it off in full each month. I think that any tricks a person can do to stick to a budget are helpful, but the bottom line is that you have a reasonable budget to begin with. Whether you have ten bucks in your pocket or a $10,000 credit limit on your Amex, you know how much you can spend each month on lattes.
Don’t discount the subversiveness of paying in cash— those social engineers who track spending habits and what have you don’t have access to who is buying what! (Another reason I don’t like to use “membership cards” at stores to get minimal discounts).
To those who have trouble tracking cash purchases–you just need to form a new habit. What I do is just put the receipt in my wallet, and if there isn’t a receipt, keep a piece of paper in my wallet and write down what I spent. I make “receipts” for any transaction I do and which doesn’t give me one automatically. Usually it’s on a scrap of paper and says something like: “$5.20 ca (cash) office supplies”.
All of my receipts, hand written or otherwise, go in a jar by my computer to be entered into my financial program. (I use an Excel spreadsheet).
I am totally a cash-only kind of gal. I’m good with numbers, but when you don’t physically hand over the cash to someone, it’s like the money/numbers are just imaginary (and not in the high tech math kind of way). I used to use the envelope system when I was first starting out. I would have an envelope for each budget category – rent, groceries, bus fare, entertainment, etc. If I overspent in one category, I could physically see where that was going to trade off with something else. It was really easy to learn good budgeting habits this way.
And I totally agree with Diva Jean – why give corporations one more way to target their advertising to you?
kate: i had a really hard time with that at first as well, but i found i still spent more money without cash. now, i just take out the same amount of cash per week, so i know how to much i need to keep track of.
fabulously broke: now, i’m even hesitant to break a $5 or a $10!
piggybankblues: totally true! it is always worthwhile to remember that it is not the amount of $ you have, it is how you budget and use that amount that really matters.
divajean: great point! another good reason to use cash.
steve: i agree. making things a habit can change something from being tedious to being second nature. i also keep a little notepad in my wallet for no-receipt purchases.
serena: so glad you brought up the envelope system! it’s a great way to *see* your spending, especially for spenders!