Cash vs. Debit to cut spending

When I was in high school, my parents taught me all about budgeting.

Later as an adult, I would share these lessons with friends and associates who wanted to save money and admired my financial savvy (of course, some friends just call me cheap) and I was always surprised by the results.

Sometimes, a budget helped.

Sometimes, it failed horribly.

When things went wrong, the culprit was most often out-of-pocket spending — that unconscious spending on items we think are no big deal: cups of coffee, lunches out, a tube of lip gloss, etc.

In his latest book,  “The Smartest Money Book You’ll Ever Read,” (Perigee, $16), financial advice columnist Daniel Solin makes the point that in order to achieve the greatest savings you have to control both your monthly expenses and your out-of-pocket spending.

Many advisers say the key to curbing out-pocket spending is to pay cash for everything. These are probably the same ones who have taught us to cut up all of our plastic cards or freeze them in a block of ice.

But is that really the best strategy to cut spending?

First, there are costs to cash, such as trips to the ATM. It is also very time consuming to track cash spending, Solin notes.

Solin suggests using a no-transaction fee credit or debit card for all purchases and tracking whether you are on, over or under budget.

Interesting — since we’ve always been told that paying with plastic makes it easier to spend frivolously.

What do you think? Do pay more attention to your purchases when you pay in cash or with a fee free debit/credit card?

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– Nedra Rhone, for the Atlanta Bargain Hunter blog

5 comments Add your comment


January 15th, 2013
2:28 pm

I like using a debit card to control my spending, but it is imperative that you enter the purchase in your check register when you get home. If you do not have the discipline to do that (and many people don’t), use cash.


January 15th, 2013
2:40 pm

Research shows that if you use a debit card instead of cash, you will spend more. Also, it is getting harder to use a debit card for some small purchases (becuase of minimum purchase requirements), and the security risks seem to be increasing (see Zaxby’s today, as well as the number of skimmers reported to pull card information in gas pumps and ATMs.


January 15th, 2013
3:19 pm

What I am trying to do is just use my debit for bills, etc and then get a certain amount of cash per pay period as my money to spend. I use this for grocery, lunches, etc.

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January 15th, 2013
6:36 pm

“Solin suggests using a no-transaction fee credit or debit card for all purchases and tracking whether you are on, over or under budget.”
I use a credit card for all purchases (over $10) at retailers. No transaction fee (other those they that they now imbed in most purchases to cover processing fees, although some gas stations and package stores have introduced “cash discounts”.) Pay the credit card off every month so no interest is incurred and limit ATM transactions to $X per month or pay period. Instant Budget.