Cash vs. Debit

by Katy on December 2, 2009 · 35 comments

The standard advice from financial columnists is to pay for stuff on a cash basis. Credit cards, even debit cards supposedly separate a person from the reality of how much money is being spent. Cash, on the other hand forces a person to be hyper aware of expenditures.

I am the complete opposite.

I actually spend much, much more freely with cash in hand than if I’m swiping a debit card.

I somehow adopt an attitude of “sure, why not” when making purchasing decisions if my wallet bulges with actual money.

The reasoning for this may be because I rarely carry cash, so it’s an exciting treat when I actually have some.

“Oooh a ten dollar bill. I think I’ll grab lunch from the work cafeteria as a treat.”

Now, I want to hear from you. (I’ve been wanting to publish a poll for awhile, and this is the perfect opportunity.)

Please also share your thoughts on cash vs. debit in the comments section below.

Katy Wolk-Stanley

“Use it up, wear it out, make it do or do without.”

{ 32 comments… read them below or add one }

Laura December 2, 2009 at 2:05 am

Me, too. But I’ve always been that way. When I got a debit card, I started spending more responsibly. With cash, I think, “Oh, it’s only $2” here, and “Just $1” there until it’s all gone and I wonder where it all went! With a debit card, I think, “Do I really want to just take $2 out of my bank account at a time?” Usually, no. The exception being iTunes . . . . 😉


Madeline December 2, 2009 at 6:12 am

I always spend more freely with cash. I think that part of it is that with the debit card, I have to think about my purchase: ‘is there enough money in this account to cover this purchase?’ I have to mentally run over my purchases this month and remember, which helps me not be extravagant, since I’m thinking about the other things I bought. With cash, I KNOW I can afford it, so I’m more tempted to buy it.


shymom December 2, 2009 at 6:32 am

I never really use my debit card. DH goes to the ATM every once in a while for cash and we go from there. We use our credit cards for most everything and pay the bill off each month. For us, it is easier and no more expensive. But, we do tend to be very careful with what we charge in general.

Now regarding the cash: I am more likely to spend 2 10 dollar bills than a 20. I hate to break a 20 if it is in my wallet. Somehow it just seems more like real money than 2 10s do.


Nancy from Mass December 2, 2009 at 6:56 am

Like the others, I spend cash more frequently because since I am the one that pays the bills, I know what is coming in/going out and what is left in checking to survive on for the month. Hubby is horrible at cash….I swear the man has holes in his pockets.


Meghan December 2, 2009 at 7:29 am

With cash, in my head, it’s already out of my account. If it’s not in the account, it’s already gone, right? So who cares if I spend it all? It’s already gone!

I can blow through cash like nobody’s business–it’s a little scary. I almost never carry it.


Carla December 2, 2009 at 7:33 am

It really doesn’t make much difference to me whether I hand over cash or a debit card. Now a credit card, that’s different. I know there will be a reckoning at the end of the month and I despise seeing a big total if I have used credit for a bunch of stuff. (We practically always pay off the whole total monthly.) I guess smaller purchases go over my head somehow. Seeing them cumulatively at the Day of Reckoning — ouch. Debit just comes straight out of the checking account and I hardly notice as long as it is a smallish amount, so it doesn’t bother me a bit; I’m paying for it NOW, today. Done. Maybe I should start using my credit card since it slows me down?

Weird logic since you pay one way or another, but… this is why I didn’t vote.


Lindsay December 2, 2009 at 8:45 am

Katy, I am the same way about cash. I spend it on lots of little things that I wouldn’t normally buy… coffee here, a snack there, maybe a pack of gum. Debit cards were no good for my husband and I either. It became a nightmare trying to spend from a joint account and keep everything balanced. Now we actually use a credit card for everything. But, of course, we pay it in full every month! We know how much we have “allowed” ourselves to spend every month, and we don’t go over that amount. For us, it’s just easier to have one big payment come out of the checking account once a month rather than tons of little ones.


hiptobeme December 2, 2009 at 9:36 am

I am tightfisted with cash, more free with debit. I can squeeze a twenty for a week. I use exact change for my purchases if possible, this helps me be wise. My husband laughs at how I can hold onto the same twenty for a week. If I don’t make change for it, no need to spend it.


Mandee Jo December 2, 2009 at 9:40 am

I think its easier for me to spend cash because I see the numbers less. I have a photographic memory and the more I look at the numbers(receipt, entering it into quicken, budgeting it, bank statements) the more real it feels. If I pay with cash I only see the number once when I pay for the item and forget about it. That being said, we take out a specific amount of cash for groceries and spending money because there is less work involved in one single ATM transaction and it makes my life easier. When it runs out it runs out.


Lisa December 2, 2009 at 11:17 am

I’m definitely a cash user. I rarely use the debit card. As far as wasteful spending goes, I’m more prone to waste cash simply because that’s what I use most often.


WilliamB December 2, 2009 at 11:23 am

It makes no difference to me what form I use so I couldn’t vote. As it happens I don’t use debit cards at all, because the accounting, protection, and security standards are weak or nonexistent.


Lindy December 2, 2009 at 2:20 pm

I guess I’m the odd ball. I use my debit card more freely.

I usually take out cash and make it a goal to last until next payday.

Even though I use a debit card at times, I still use the check register to keep track. Just one less thing to have to deal with, less mistakes, etc.


Lisa P December 2, 2009 at 7:26 pm

I am a fan of using a charge card (AMEX) – I like that I’m forced to pay it in full at month end, can track my spending online, earn rewards and have the protection that I wouldn’t have with debit card purchases. Granted I pay an annual fee but since I tend to be a worrier (I worry if I’m not worrying about something…like I’ve missed it lol). I like having “help” just a call away and that service is worth it to me. I always carry a little cash but generally don’t use it and leave my debit card at home.


Martha December 2, 2009 at 8:59 pm

I don’t use a debit card–I have a hard enough time keeping track of whats in my checking acct without adding a debit card to the mix. I actually think it is an age thing and clerks usually confirm that when I ask them: younger people use debit cards more than older people (I’m not old but am graying…). I also can’t seem to remember a PIN for the ATM except when I am traveling internationally so I have to go into the bank to get cash or use check or credit card and I don’t think how I pay for things influences how much I spend…


Julia December 2, 2009 at 9:42 pm

If I have cash, I tend to spend it more freely. Like Lindsay above, I’ll buy a coffee, the kid wants a cookie, hey why not a children’s book at the used bookstore…etc. So until a few months ago, I almost never carried cash and instead charged everything, paid in full at the end of the month, and laughed at the bank for all the free $25 certificates they were sending me. However, we needed to cut back and found that by writing more checks (and using the debit card for groceries) and paying cash for the rare occasions we eat out, we did actually spend less than using the visa. Now, I’m loving the super small visa bills and coming to terms with being more strict with my cash.


Julia December 2, 2009 at 9:43 pm

p.s. I meant to add, but I still feel “rich” if I see cash in my wallet and have to really force myself to remember that money is spoken for. Why does being a grown-up have to be so hard? 😉


Heidi December 3, 2009 at 5:37 am

I rarely (if ever) use cash, and I don’t have a debit card. I use a credit card almost exclusively. I always pay it off in full every month, and I have never carried a balance or paid a fee. It does not encourage me to spend more, and it does not seem like “invisible” money to me. I know how much I can spend, and I don’t go over that.

I like to use a credit card for two reasons. 1) I download all transactions electronically into my quicken software. Makes for neat record-keeping (I don’t need to manually enter every last receipt, it’s all done for me) and helps me track expenses. 2) I like using the “rewards” programs. Put a few necessary evils (auto or homeowners insurance for example) on a credit card, and the rewards build up fast. I get 5% back on gas every month, and 2% on groceries. Try making that in a savings account!


Shannon December 3, 2009 at 6:11 am

I am better with cash because when it’s gone, it’s gone. Any form of plastic in my hands just leads to a lot of last minute justifications on my part. Doesn’t help that my husband loves credit cards because you can track the information, which I like too, and he is very disciplined with them! Our compromise is that I’m using the debit card for now, and writing every transaction down in the checkbook register as I go.


Ashley English December 3, 2009 at 7:26 am

This is totally the conundrum I share with Glenn. He always wants me to carry cash (which I never do), and I always want him to leave the money in the bank. I am WAY more liberal with spending when I know there is cash in my wallet. When it’s in the bank, I know it’s somewhere safe, and I could never lose it, like I might with, say, a wayward $20 that fell out of my wallet. It is our perpetual dilemma. I’m so glad you’re on my team!!!!


365Girl December 3, 2009 at 7:55 am

My husband and I put everything on credit card! and we pay the bill at the end of each month. The credit card company pay us for the privilege of keeping our money in the bank a few extra weeks each month by giving us cashback on everything we spend…
This way each month we both know exactly what we have spent and on what and its easy to see where unnecessary purchases have been made. It also makes it easier for me to resist temptation as I know someone else will be checking the bill and asking ‘Did we really need that?’


magdalena December 3, 2009 at 7:55 am

I use mostly cash, because so many of my purchases are tiny amounts.Some stores here will not take debit cards for under a $5-$10 purchase, so we all need to carry some cash for coffee, a carton of milk and so on. But I can make two twenties last all month in my wallet, and use them just for food – unless my husband is with me, when I know there will be a coffee purchase. When I first had a debit card, I was footloose with it, and ran into problems at the end of each month. I soon got disciplined and rarely use it except when I have to pay for a large purchase. I don’t use credit cards and wouldn’t use the debit card except I don’t always live close to a branch of my bank. I avoid those pesky transaction fees as much as possible!


WilliamB December 3, 2009 at 11:18 am

Does it have to be the same solution for both of you?

If using credit improves your spending habits, and using cash improves his, then it seems logical for you to use credit and he cash. You wrote that using credit improves your spending habits; so that leaves only the question of what using cash does to Glenn’s.


Kris-ND December 3, 2009 at 12:28 pm

I am slowly switching over to cash. I don’t carry cash very often, and I am the opposite when I do have it. With cash, since I see it and know that once it is gone, it is gone, I am much more careful with what I spend than I am with a debit card or check.

When I go to the Commissary, I have a grocery goal, but because I know there is money available to go over budget if I write a check or use my debit card, I tend not to be as careful as I do when I have cash and have no choice but to stay within the amount in my wallet.


Pat December 3, 2009 at 12:44 pm

I also use exact change and try not to break a $20. I have alot of trouble with $5’s (they jump from my wallet with wild abandon) so I hold onto my $20 until I absolutely have to spend them. I only use my debit card for groceries and cash for everything else (gas, misc purchases during the week). I like to get a $50 occasionally since I will “go without” for weeks just so I don’t break one.


Robbie Kay December 3, 2009 at 3:12 pm

Thanks for posting this. I first remember hearing this assertion at a Dave Ramsey Live event and as much as I like Dave, it’s troubled me ever since. They say something like you spend 12% more (don’t recall the exact number) when using plastic then you would cash. First of all, I don’t see how you can prove in a study how much people *would* have spent. I would really like to read about how this study was conducted (though come to think of it, I think it’s credited to MIT, so I probably could find the information out there on the web). Secondly, if you’re sticking to your shopping list, your total should be the same whether you’re using cash or plastic to pay for the purchase.

I’m a newlywed (almost 18 months). When I was a single person, I tracked all purchases, including those made by cash (now we each have a cash allowance so that we can make purchases that would make the other person cringe without having to account for them). When I would analyze my spending every month, invariably the only area that came up as a problem for my spending was eating out/buying snacks. And guess what I nearly always used for that spending area–cash. And sometimes if I didn’t have cash I would do without. I have long tried to limit the amount of cash I carry. To me it seems way too easy to spend.


Janknitz December 3, 2009 at 4:53 pm

I’m not safe with cash, but with my debit card I imagine having to explain to someone why I spent $8 at Starbucks or bought lunch somewhere–hard to justify when we are trying to avoid spending, and keeps me (mostly) off the debit card.

I get about $10 spending money every few weeks, and the goal is to keep that $10 bill intact as long as possible, but it’s really HARD. If I spend it, I don’t let myself get more, but it’s not really a great idea to walk around with less than $1 in your wallet either. Sometimes you just need some cash!

I got stuck in a parking garage once with no cash to extricate my car, and nearby merchants would not give extra cash with an ATM purchase. I was literally digging coins out of the crevices in the seat to pay my way out! Fortunately(?), now our city garages take plastic, and then I also have a receipt when it’s for business purposes.

There is an emergency $50 bill tucked deep in my wallet, but it has to be a REAL emergency, and so far I’ve managed not to touch that.


AFriend December 3, 2009 at 6:33 pm

I am done with cash. I had a cashier insist I had given her $80 when I had handed her 5 twenties (I had to grab the bills out of her hand). A grocery checker gave me change as if I had given a $5 bill (I had given a twenty) and I had to stand there, like a criminal, while the entire drawer was counted in front of witnesses. Another did the “you gave me a ten” when I had given her a twenty. So – no more cash. NO.


Jeni - Frugality Virgin December 3, 2009 at 9:10 pm

Katy- I used to work with you in L&D and I have to say the worst for me was the fact that you can pay for food at Cafe W. and the cafeteria with your ID badge and it gets debited right out of your pay check. It makes it way too easy to buy lunch every shift. I often would look at my pay check and think …where did it all go?… oh the cafeteria. 🙁


Marie-Josée December 4, 2009 at 8:15 am

I prefer cash over debit, which I don’t use often as we are billed a fee if we go over ten transactions per month. We would need to keep a $2500 monthly balance in our bank account for the bank to waive banking fees, which isn’t going to happen soon as we have a daughter in university and a son in college…I’m with Carla, it’s the credit card use that gets me anxious. My husband and I have been debating this for some time: in the past several years we have used our credit card to pay all of our expenses (food, gas, wine, repairs and any other service that we could pay automatically via monthly credit card payments, such as cable and donations). This adds up to a tidy sum each month and the bonus is a 1% cash-back at Loblaws, a grocery store chain here in Canada. I don’t know what I could compare Loblaws to in the states, but they have a natural foods section, home decor stuff, a flower shop, pharmacy/drugstore, you get the picture. So once a month I would use the cash-back to pay part of our weekly food shopping. The downside is that we were ALWAYS shocked and dismayed upon receiving our monthly statement. In the past six months we have been paying cash for essentials and fun and we feel SO much better using that system. It really keeps us connected to reality and we are always astonished by the speed at which we can spend a wad of cash. However, we (mostly I) have this nagging feeling that we are silly not to pay with our credit card for essentials as we are getting FREE cash in doing so….


Sierra Black December 11, 2009 at 6:18 am

I also rarely carry cash, and feel like it almost doesn’t “count” – “oh! look! $10! I’m rich! Time to spend it!” – but my husband is the opposite. We were spending something crazy on groceries every month until I started sending him to the store with a list and five 20s. Having the cash in hand makes him stick to the budget no matter what.


Annie Jones December 5, 2011 at 4:52 am

It’s financial safer for me to use debit cards or even credit cards. I get a receipt for my transaction, have an online record of it, etc. When I use cash, it just runs through my hands like water. I usually only have cash when I’m planning on shopping at garage sales or swap meets (where they don’t take anything else). Of course, there are no receipts at those places, so I have no idea where my money goes or how to account for it in my budgeting program other than just calling it “cash withdrawn”.

I use debit for nearly all of my purchases and feel I spend less and am more in control than with cash. Credit card purchases are very rare for my husband and me, and make us both feel very nervous and apprehensive when we make them. We usually only use credit for things like room reservations or when we have to pay in advance for goods or services and want to easier recourse should something go wrong. However, I usually make sure those debts are paid within days…just as soon as they post to the credit card’s online statement.


Kate December 7, 2011 at 8:14 pm

YES!! I am the same way! If I get cash it gets spent soon soon soon (it’s there, burning a hole, I need to use it up!!) but my debit card I definitely don’t use willy-nilly.


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