Are you one of the millions of people that rarely carry cash? The number of people that routinely carry cash with them is on the decline as more people move to debit cards and credit cards as their primary payment methods for everyday purchases. The convenience and safety of using these cards have persuaded many people that they no longer need to carry cash with them to buy the items that they want. Unfortunately, the people that are choosing to use plastic instead of paying with cash may end up spending more in the long run.
Overspending
Research has shown that spending cash triggers more of a feeling of loss than using plastic to pay for your purchases. Because you swipe your card and keep it in your possession, it may not feel like a real exchange. It doesn’t feel like you are giving anything up to get what you want, which could become a dangerous trend for some of us. Spending with a card also makes it harder for you to keep track of how much you are actually spending, leading many people to spend much more than they planned without realizing it.
Additional Charges
Credit cards and debit card often have fees associated with them that the user must pay to continue using the card. With credit cards, many people have to pay an annual fee for using the card, as well as finance charges for carrying a balance from month to month. Debit cards have their own fees that slowly chip away at the balances of the accounts they are linked to. Many retailers have minimum purchase amounts and/or surcharges for the people that use plastic instead of cash in their stores. These charges can add up to hundreds or thousands of dollars over the course of a year.
If you are trying to limit your spending, one of the most successful techniques is to put away the credit cards and debit cards to switch to cash spending only. Spending cash forces you to consider how much you are spending, how much you have left, and whether the purchase is worth the amount you are paying for it. People that switch to paying for everything with cash have to plan out their daily or weekly expenses to determine how much cash to carry, increasing the chances that they will stick to their budget. Over time, they find that they spend less and reduce the number of unnecessary purchases they make.