Credit and debit cards carry with them a terrible temptation. There is no discomfort when you use them. Making a large purchase with cash requires you to literally surrender real money from your hand. The pain comes immediately, whereas a credit card carries with it an “I owe you” quality and a debit card doesn’t provide that proverbial sting, because the transaction is conducted electronically.

My experience

I suffered this problem when I first got a debit card. It seemed effortlessly to offer a cashier my card, as if someone else was paying for a book, movie, or food. I also got into a predicament when I began buying a stream of books through online sites such as Amazon. It wasn’t until later that I realized how much I had spent in such a limited period of time, because I was not very thorough with my checkbook.

Maintaining an accurate and updated checkbook is one solution to the problem, but I also found another viable method which hopefully you can use and integrate into your own methods.

Solutions

First, write out your budget for the month. Now, separate them into two categories: One for purchases, such as rent, which remain constant month after month. The second category is for purchases which can vary, such as gasoline and entertainment, and change frequently.

Take the second list and determine what can be paid for with cash and how much you are able to afford to allocate towards the second category each month. The rule of thumb is to be more liberal than conservative on the estimate.

Have this amount withdrawn from your paycheck or bank account at the beginning of each month and place it into either a specifically marked envelope or in your wallet and wrap it with a rubber band.

Then, simply use cash for your purchases. When you fill up your car at the gas station, eat out, or buy a movie or a video game, use cash.

What this does is make it easy and simple for you to determine how much money you are able to spend per month. All you have to do is look inside of the envelope or your wallet. Whatever you have left is what you can spend.

Observing other people’s mistakes

Working at a sporting goods store, I witnessed hundreds of customers spend over $1000 in a single purchase. Every time they did, it was with a credit card. I sincerely believe if they had reached into their wallet and taken out the cash equivalent, they would have taken a long second look at the items were they on the verge of buying and discovered it wasn’t worth the cost to them.

In fact, customers who did pay in cash often reduced the number of items they bought when they realized they didn’t have the necessary amount to pay for it. Rarely did they resort to their card to cover the discrepancy. When people lack of actual money to buy something, it creates a psychologically reaction, which usually makes them hesitant enough to not go through with the purchase. It’s reality politely telling you to ease off on the spending.

And it’s better than watching a cashier swipe your credit card, only to inform you that it’s been denied because you’ve reached your spending limit. Unlike Congress, you can’t raise your credit card limit just because you’ve hit the ceiling.

Certain items, however, can only be bought on the internet, and if you use eBay frequently, it is required to use a credit card. In this case, set up a separate bank account and have a scheduled transfer at the beginning of every month from your primary checking account. If possible, use a certain credit card only for such purchases. As before, it is imperative that you do not initiate any other transfers. Self-control is paramount.

A separate bank account and cash on hand will give you greater flexibility while also maintaining a limit on spending.

Cash makes you think twice

In a digital age like the one we live in, when you use cash, you avoid making purchases you’ll later regret, and it will spare you from a lot of grief which plagues those addicted to card-swiping.

The tale of the Pied Piper of Hamelin is a moral lesson on fiscal responsibility; the people of the town took an “I owe you” on his services, and then regretted their purchase and refused to pay for it. Didn’t quite work out the way they wanted.

Think of the stereotypical adult, who is commonly is depicted buried amid a mountain of monotonous receipts as they attempt to balance their checkbook and confirm the accuracy of every bank statement. It is a tedious and painstaking process which can be circumvented in many instances.

If you use cards less and cash more, you decrease the number of bank transactions, thereby making it less arduous to navigate when you’re inspecting it for any oddities. Additionally, it decreases the chances of identity theft and are easier to detect them they occur.

A lot of identity thieves rely on the proliferative use of credit and debit cards to hide their activities. Often, they will make small, discreet purchases, which will easily blend in with other similar transactions, to test their victims. If no alarms are raised, they will continue doing so until they make such a large purchase that their cover is blown. Prevention requires either a vigilant consumer or a wise consumer.

Ultimately, using cash is a way to prevent bad debt. When you pay with cash, you’re paying up front. There is no monthly payment, no fees, and no interest rate.

photo by seanmcmenemy