Cash vs. Credit Cards: How to Control Overspending

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Cash vs. Credit Cards: How to Control Overspending

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Some people have a penchant for recklessly spending cash. Others have no control with credit cards. Here are two case studies examining the problem, and a few solutions to bring overspending into balance.

Case Study #1: Uncontrollable Credit

My friend Grant simply can't be trusted with a credit card. To him, using a credit card doesn't even register as something he'll have to pay for later; its instant gratification now. Having twice gotten into trouble by maxing out cards with no ability to pay for the consequences, he has realized that he simply can't ever own a credit card. (Note: Grant's ailment extends to direct debit purchases too, but curiously not as much; thus he has one but leaves it at home).

Case Study #2: Slippery Cash

I, on the other hand, charge everything possible to my credit card (partially for the frequent flyer miles), no problem. But I recently received some cash when selling a car, and was unable to deposit it to an account (I was abroad). So, I stashed the cash and used it for daily expenses over time instead. I was gobsmacked at how quickly the cash slipped through my hands...and I couldn't even tell you where it went. Somehow I attached less value to cash and coins (and thus miss-spent), than I would if I had to charge that "spare change" to my credit card.

Cash vs. Credit

These case studies are two versions of the same story; there's a breakdown in discipline, due to perception of value. In each case, we perceived a lower value to one or the other, and in our own ways, were unable to control our spending.

Where Does It All Go?

Grant spent extravagantly when he had possession of credit cards. He lived it up - without regard to the consequences. So he has some great stories to tell from his spending days, but little to show for it.

Conversely, I didn't spend extravagantly. With cash in hand, I popped into local stores and markets (that only take cash) with more regularity, on the premise that I'm "just getting a few things for dinner", routinely coming out with much more. Because of these increased trips to the store, I broke one of the golden rules of supermarket savings: shop on a schedule, not impulse.

Controlling Credit

If you identify with Grant, then it's time to implement some techniques to manage your credit cards (if you choose to have them at all). One of my favourites is to "freeze your purchasing power", by literally freezing your credit cards, so you can't spend on impulse.

Managing Cash

If you're more like me, the first step to managing cash is not to have it available. If you have a wad of cash, stash most of it before you go out and only take what you realistically need with you. You can use the envelope method to allocate the cash to your budget and keep from overspending.

Tracking Your Expenses

In both cases, it pays to track your expenses. I like to use smartphone apps so I can see - as I'm spending - whether I'm on budget and record new expenses as I go. But mine isn't the only way; there are a few ways to track expenses.

Which is your weakness: cash or credit cards?


How to Conquer Impulse Shopping Syndrome

Budget Technique #99: The Envelope Method

Easy Ways to Track Your Expenses


Nora Dunn, travel and lifestyle expert guest blogger for leading provider of debt relief, CareOne Services, Inc. Nora Dunn

Nora Dunn is The Professional Hobo: a full-time traveler and freelance writer. Having sold her business and belongings to travel, she has been on the road since 2007. She travels in a financially sustainable manner, specializing in creative travel strategies like getting free accommodation and flying in business class for less than economy prices; all the while earning income with her location independent career.

As a former Certified Financial Planner, she is financially responsible for her actions along the way. She believes there is a fine balance between planning for tomorrow, and living for today.

She has penned the book How to Get Free Accommodation Around the World, is contributing author to the book 10,001 Ways to Live Large on a Small Budget, and a regular columnist for Wise BreadTransitions Abroad, Flight Network, and many other publications.

Please enjoy her articles on the topics of travel, personal finance, and lifestyle design.

You can also connect with Nora on Facebook, Twitter, and Google + Nora Dunn

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  • Thanks Ms. Dunn for your article on Cash vs Credit Cards. I haven't held/used a Credit Card since 2007.... I thank Allah/God the day I took that BOLD step by calling CESI DEBT SOLUTION. I'm 6 months shy of accomplishing my DEBT FREE GOAL. I'm very please to say that I'm utilizing my rights to BUDGETING, and I'm seeing wonders. Allah/God is Great always. Bless you TEAM CESI..... continue the outstanding job been performed daily. Peace. (Helping others to help themselves).

  • Thanks for sharing this beautiful article. It is very helpful to understand the difference between cash and credit card.

  • I am really happy to say it is very informative post to read. I learn many new things from your article. Thank you very much!!

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