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Will Using Cash Help You Spend Less?


If you think using a checkbook is “old school,” think about what it was like to only use cash. Debit and credit have become so commonplace that paying with cash seems to take cashiers back a second, almost in disbelief. It’s just so convenient to swipe your bankcard these days, especially if you’re trying to get through transactions quickly. So why would anyone use cash? The reasons might surprise you.

Studies show that people spend 12-18% more when they use plastic (not including fees) and a study done by McDonald’s showed that people using credit spent 80% more than someone using cash. There’s just something about using cold hard cash that causes you to think twice before you spend.

How Using Cash Can Help You Spend Less and Save Money

1. Cash Gives You Better Control of Your Budget
You’ve heard of the envelope system before. It’s a way of budgeting your money with envelopes for categories like groceries, entertainment, eating out, and other bills. Each month you fill the envelopes with the allotted cash for that category and only spend the money from that envelope. If you’re going to the store, grab the envelope and spend only the money inside.

Why it works: You can’t spend what you don’t have when you’re on a cash budget. I know we’ve seen tremendous changes by using cash when spending money at the grocery store. It helps me and my spouse to keep focused with our two person, $250 per month grocery budget and keeps us from overspending.

2. You Don’t Get Charged Interest
I hope you don’t carry a balance on your credit cards each month. The interest charged for credit cards can be a staggering 28% or more. Using cash eliminates the chances of missing a credit card payment and being charged interest on last month’s purchases.

3. Using Cash Could Mean More Discounts
Did you know that stores get charged a fee to accept a payment via credit? Most large stores like WalMart and Walgreens don’t worry about the charge, but small stores in your community love to accept cash over credit because of the fee that comes with accepting credit cards. Ask the store if they give a cash payment discount. It’s more popular than you think, and you never know until you ask. My wife and I saved 5% by paying for a piece of furniture with cash, savings that I would never have know about unless I asked and came prepared with cash.

4. Cash Helps Control Impulse Spending
When you shop with cash, you know that you’re limited to what you have in your pocket. This helps you to stay focused on your list, ignoring the temptation to add extras to the cart. Without a credit card, you really have to stop and ask yourself, “Do I have the money for this?” That’s something we should always do, but it’s just so easy to swipe a card and assume that it’ll all balance at the end. Using cash can help you to become even more disciplined in your spending and leave you with a feeling of financial control at the end of the month.

5. Keep the Change for Something Big
I know some of you are probably thinking, “I don’t like using cash because the change is annoying to handle.” My wife doesn’t like change because it makes her purse heavier, and I don’t like change because I don’t like storing a bunch of change in my pocket. If you can bear the annoyance until you get home, put all the change into a jar or can. We saved a small glass jar full of nickels, dimes, and quarters and socked away $75 in a matter of a few months. Use that as your fun money or for whatever you want.

While cash may not always be the most convenient thing to use, it does help you to control spending and sometimes leads to a discount at stores. Who knows, that might just make it something worth trying!

How do you feel about using cash? Is plastic more convenient? Do you think that using cash could help save you money each month?

This has been a guest post by Tim from Kirksville, MO
Find out more about the KCL Contributor Network!

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27 thoughts on “Will Using Cash Help You Spend Less?”

  1. I think there just is a balance. We have cash budgets for buying things and eating out. I keep the buying things budget (includes all our groceries and the like) and he keeps the eating out budget. But everything else we still use debit for. Sometimes it’s just easier. All of our bills come out of our account automatically, so they’re never overdue and we don’t have to drive to pay them. Gas is another thing that comes out of the account, because paying cash is a hassle and it’s something we have to buy no matter how often we need it or how much it costs. It’s just too hard to budget for. But by sticking to cash on groceries and eating out, we have a lot less impulse buys and I cook a lot more instead of stopping for food on the way home. If you’re disciplined enough to do all cards, I’m jealous. I find it easier to pay, but not as easy to keep track of. And, if you can do it all with cash, more power to you. But I think having a balance is the most doable. Besides, having the money in an account is perfect for emergencies. I’d hate to try to combine all of my cash from envelopes to pay for something that came up last second.

  2. Anonymous says:

    i hadly ever have cash, i am very responsiable with my plastics, i never buy nothing with them that i don’t need or want, i do agree with aonther post and the article that some stores givue u cash disnount, but usully i dnon;t have that much cash to give up at once (back in may we bought a bedroom suit for our doughter form ashley’s and if we had cash ir would have been 20% off, that was still more money at once then i had to give, so instead we did the 24 months no interest, and i have made evrery payment on time and will pay it off in time) i think there is no right way about shopping it is just what works best for u, for some it is cash for others it is plastic and for some eather one

  3. Diana Stone says:

    I must throw in my 2 cents…. 1- paying with cash is just as quick & easy if all the lazy unorganized sheep in the world would put their cash in their wallets all facing the same way and in order from small to large bills. If you stay organized like i do you can get in and out quicker than one using debit (who has to stand there & try to remember their PIN #) or credit (who stands there dumbfounded cause they forget EVERYTIME they have to sign & press OK on the machine). I know cause i work for a big retail chain….

    2- Change isnt a big deal if AGAIN you put it in a chain purse or wallet where it belongs… In fact if i have just a few items, i count in my head (rounding up for tax) how much it should be so while standing in line waiting my turn i get the money out and am ready to pay before my stuff is rang up.

    3- Cash is simplier because when you need it you have it. It makes my IQ drop everytime a customer comes in, grabs an item at the register they’d never normally buy just so they can use their debit card to get cash back. Ummm how many banks/ATMs does one pass just driving to a Walmart? How much gas does one waste to drive to Walmart so they can get cash off their debit? And for that bag of chips you probably arent going to eat anyways you coulda paid the fees at an ATM near your house.

  4. Anonymous says:

    I have paid cash for everything for 13 years (I’m 33…) We are going to buy a house this year and when they pulled my credit report…well, I don’t have one. At all. I don’t exist in the credit reporting system. *sigh* So I have to figure something out to create some. My husband has been cash-only since we got married 7 years ago. We have paid of $100K in debt in that time on one moderate(ly small) income and saved a hefty down payment. Cash works…And even if you pay off your balance each month, the studies prove that (MOST) people spend more with a card than they do with cash.

    • Imona Budget says:

      Me either….my credit report is white space….but as for the rest of your post…..My advice…keep saving!!
      And pay for that house in CASH!!!! The interest on mortgage is legalized theft!

      I definitely spent more money using a credit card than cash…it’s not about interest all of the time…and I think that that is Dave Ramsey’s point….

  5. Anonymous says:

    I don’t do the cash thing, but I travel through a major city daily and I don’t like the idea of carrying cash. Far too many friends of friends have been mugged.

    I’m in Philadelphia, so the entire time I was reading this, my first thought was, what happens if you get mugged? Sad, lol.

    • Anonymous says:

      Party of Dave Ramsey’s theory is that you are being robbed everyday by credit card companies charging you interest. It really is worth the risk in the long run. It’s not like you will be carrying THAT much.

      • Anonymous says:

        That is only if you actually pay the credit cards interest. The system works for people who can control their spending and pay off the balance each month. Then it’s like an interest-free loan until your payment due date. But I’m very anti-Dave Ramsey. lol

        • Imona Budget says:

          It’s not just about paying interest…it’s about the rationale of the purchase….people tend to spend less when they are on a cash budget…..Dave Ramsey chooses the “interest” argument because most people aren’t able to pay the balance off every month, and that’s why they are in trouble…other folks aren’t disciplined enough to control their impulses with credit cards….but they are FORCED to control them when they are only dealing in cash..do you see what I mean? Dave knows this, but most people won’t admit to it, so he makes it “non-personal” by blaming the interest because most people understand that rationale….

      • Simple solution: Pay off your credit card balance as soon as you spend the money.
        I earn about $15 a month from my rewards credit card and I never pay a cent of interest.

        • Anonymous says:

          It does sound simple. However, there is a reason credit card companies are in business and that is because alot of people do NOT pay off their cards in full every month.

      • Imona Budget says:

        Dave is right. I thought that I was a VERY disciplined person…very frugal, etc….and we paid our card off every month and paid no interest and flew a family of 3 on vacation one year(except for baggage fees) off of the mileage points…but our balance every month was astronomical…swipping that card for giftwrap, grapes and fries and a coke adds up…..I switched to the envelope system this summer, budgeted “blow money” and we save a LOT of money a month(I won’t say the figure, but it’s HIGH) by not using our cards…I could slap myself for the money we wasted by using that card….the muggers would take less than what we were spending per month….

        • Anonymous says:

          You are right. Most people won’t take into account the extra money they will spend out of “convenience”. It really does add up. My husband and I also started doing cash this summer and we have been able to pay off an astronomical amount of debt. We use online bill pay for all of our bills and the envelope system for weekly “allowances” for each of us and groceries. Add in couponing and I’m sure you get the picture :) To me, it is worth it not having any extra debt in credit cards hanging over my head, even if we would be paying the balance off every month. Not owing ANYONE is always a great peace of mind.

      • Anonymous says:

        I guess that’s fair, although I don’t use my CCs, I just use my debit card as a CC. I do have CCs that I use to buy my text books … that I pay off immediately so I can use the points accrued to buy the next semester’s books.

        I don’t really like a lot of Dave Ramsey’s theories, but I think if he helps other people get out of debt, he must be doing something right. I think a lot of it just doesn’t apply to me, if that makes sense.

    • Imona Budget says:

      You shouldn’t take all of your cash….for example…if you’re going to work, lunch, taking the subway and maybe picking up a cup of coffee…you shouldn’t have more than $40 in your pocket….(for example)

      • Anonymous says:

        That absolutely makes sense; I just tend to run errands after class, so I would need to have it all on me. I think cash only is great for some people, esp. those in the suburbs who don’t take public transit, it just wouldn’t work as well for me.

  6. Angela White says:

    I like couponing with cash because it makes returns easier when something doesn’t go right, like a reward doesn’t print out like it should or whatnot. Technically you should be able to also opt for a cash refund if you paid with a debit card, but a lot of times the cashier doesn’t want to do that. Crediting back to a credit/debit card can take days! I’m too dang broke for that.

    That said, I just opened a ING account through that Black Friday deal and am starting to use that as my couponing account. It’s easier than cash and is separated from our other money, but I might miss those easy refunds…

  7. Anonymous says:

    Great article, Tim. Thanks. I think I might try the envelope thing. ;)

  8. Anonymous says:

    I’ve been using cash for 4 yrs now, i used to have a huge amount of debt and paid it all off by not using credit anymore, with cash there’s struggles that comes your way which is normal since your using most of your paycheck for all your bills and expenses, extra goes to savings, atleast i can sleep at night not worrying about any debts i need to pay, although i must say, you can still use cc with the rewards, in order to not pay interest just pay the whole thing off with cash every month, at the end of the year you can see how much rewards you racked up without having any debt! but this requires a lot of self control! lol which i try to avoid doing having all the credit i have available now.

  9. Anonymous says:

    Check out Dave Ramsey’s website and look into his “envelope system”

  10. Anonymous says:

    I love using credit cards, because I can earn points that pay me back in cash. I always look for good deals with credit cards, such as when you shop through the credit card website, you earn more points. A lot of times, credit cards give you 5% back in some categories.

    Other than that, I can track what I spend everyday with online statement.

    • Anonymous says:

      I’m totally with you on this. Get points or miles for the money you’re spending anyway, why not? How else would I score two business class tickets to Hong Kong for free? :) Plus credit card purchases are so much easier to track, come with extended warranty or purchase protection. I know not everyone in the world is disciplined with credit cards, but if you can do it, it’s the way to go!

  11. Lauren Thoman says:

    We use the envelope system, and it saves us so much money. I didn’t realize how much my impulse buys that were “only a dollar or two” were adding up every month! I’m kind of shocked to see how much we have left over at the end of the month now.

  12. I have no debts because I pay everything with cash!