No, I’m not talking about what you carry your purchases out with.  I’m referring to how you pay for them.  Some people use their debit or credit card for every purchase and carry no cash.  Others swear by cash only.

Financial author and television personality, Gail Vaz-Oxlade likes people to set up a cash envelope system for different categories to monitor their spending habits.  In fact when I was first married, I set up our budget with this same system.

Of course, that was in the days before plastic and everything including mobile credit card processing was a farfetched dream and it worked for us, more or less.  My husband is a spender and it controlled his spending somewhat.  When we got our first debit cards I almost had a heart attack when I saw all the debit transactions on our statement.  It just didn’t seem like real spending to him.

It may seem like I’m a terribly controlling wife, but now he gets a set amount of cash and when it’s gone, well, too bad.  Everyone needs to find a system that works for them.

Pros and Cons of using Cash

People see cash as more real.  When it starts to dwindle, their attention is piqued so they tend to be more careful.

I hate to break up a large bill for a small purchase, but once I do the smaller bills slip right through my fingers.

Carrying large amounts of cash can be dangerous – it can be lost or stolen.  The envelope system doesn’t work if you keep borrowing from one category to spend in another.

Cash forces you to notice how much you are spending.

Pros and Cons of using a Credit Card

When you use your credit card for day-to-day purchases you can collect reward points or get discounts and promotions with store loyalty cards.  You don’t have to bother going to the ATM when you need to make a purchase.

On the other hand, people tend to spend more when they use plastic.  Debit card users falsely believe they can’t get into financial trouble because the money comes right out of their account, but it can ruin their budgeting unless they record every transaction.

Using credit cards raises the “cost of goods sold” by causing retailers to pay a percentage for each credit transaction, and, of course, that cost is passed on to the consumer.  It’s a bother to swipe your card for piddly little purchases.

Buy now (on credit) and pay (the minimum) later has caused a lot of debt problems.  High interest rates (if you don’t pay the balance monthly) and annual fees often offset any rewards you may earn.

So…are you safer using a credit card or using cash?

What’s your spending style?


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