I got in to a debate with my friend last week about whether cash or credit card encourages it’s user to spend more money.
My stance is that cash does – definitely! I find that the second cash enters my pocket, it’s gone in 60 seconds. I feel like it’s free money, because it’s here today, gone tomorrow. I don’t have to worry about logging onto my bank account and paying the bill when it comes to using cash, so it removes the pain of feeling it leave my pocket twice.
My friend said the opposite. She was convinced that using a credit card fosters spending carelessly more than cash does, because you don’t have a physical entity to part with. Your wallet still feels just as light when you use credit card, instead of cash, which you start to feel separation anxiety after parting with.
Aside from my argument that cash is more dangerous due to the reasons above, cash may be more dangerous in the following ways:
1. It’s Not As Easy to Track
On a credit card, if you forget what you spent money on, you can pull up your banking records online in seconds. Even if you don’t have online access to your credit card, you will likely get a paper statement at the end of each month, which is a nice reminder of what you spent your money on.
However, with cash, you have to remember to keep the receipt, which many people struggle with.
2. It’s Impossible to Replace If Stolen
If you’ve ever had your wallet stolen, hopefully you didn’t have any cash in it. Unlike credit cards or debit cards, which can be cancelled by calling your bank, cash can’t be replaced if it’s stolen.
3. Small, Impulse Purchases
Many people hesitate to buy something for less than $10 on a card, for whatever reason. Many companies actually charge extra to use a card on a purchase under a certain amount, because the retailer incurs a fee for utilizing the service.
Because of this, cash can be more conducive to picking up a pack of gum or a lottery ticket when you are waiting in a lineup. It’s easier to break a five or pull out some coins than it is to think of using a card.
1. Money That You Don’t Have
Cards can be dangerous, especially if you are using a credit card, because it feels like free money. There’s something so laissez faire about being able to charge something to a card and pay it back later
2. It’s Easier to Pay with a Card
It’s easier to pay with credit or debit card than it is cash. You just pull out the card, punch in a pin, and you’re done. No need for waiting for change, counting it out, or visiting the bank or ATM to withdrawal cash. At restaurants, the card is whisked away and a receipt delivered.
Furthermore, there’s the new swipe-pay technology which allows you to literally just swipe your credit card over a sensor and not have any other hassle – who wants to pay with cash and go in and receive change when you can just swipe a piece of plastic?
3. You Are Paying More to Use One
If you aren’t a person who pays their credit card bill off in full every month, you will have to pay interest on the balance, which is one of the biggest negatives about a credit card. This can make it more dangerous, too, because you don’t have that issue when you are paying with cash.
Regardless of what the evidence shows, it’s important to know yourself and know which one makes you feel more comfortable and which is worse for your spending. We are all individuals and all have different triggers for careless spending.
Which do you find worse for spending – cash, or card?