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Liz Pulliam Weston suggests that you may want to consider using cash instead of a debit card. Weston admits that debit cards offer plenty of advantages, including:
- They’re convenient.
- They’re easier to track.
- They may offer some protection.
- They may offer some rewards.
Despite these advantages, she suggests that it may be better to move to a cash-only system. It’s just too easy to overspend with a debit card. She cites one family that uses the “envelope system” for allocating cash for various needs: the family places cash to envelopes (marked “food”, “gas”, “entertainment”, etc.) and uses this money for the designated purpose. This not only prevents overspending, but also serves as a sort of built-in budget. Experts advise: if you can eat it, drink it, or wear it, pay cash.
Before moving to a completely cash-based system, Weston warns to:
- Expect some trial and error — it may take time to perfect the system.
- Don’t carry big wads of cash — it’s too tempting to spend, and you have no protection.
- Mind your credit scores — you’ll need them for large purchases, such as a house or a car.
I have not yet developed the strength of will required to forego my debit card completely. (Though I gave up all credit cards several years ago.) It’s too convenient. Still, there are times that I choose to use cash only.
For example, any time I go on vacation, I travel on a cash basis. I know that if I were to rely on a debit card while on holiday, I would be too inclined to buy souvenirs and to eat more expensive meals. If I’m headed to Central Oregon for a weekend vacation, I might take $100 with me, knowing that has to feed me, entertain me, and buy me gas for three days.
If you do opt to use a cash-only system, if only for a weekend vacation, be sure to track your expenses. It’s important to keep a notebook or a business card on which you write every cash expenditure; there’s no built-in record-keeping system such as the bank statements serve with a debit card.
This article is about Choices, Hints and Tips Thursday, 20th April 2006 (by J.D. Roth)
April 20th, 2006 at 12:56 pm
Actually, the decent compromise here is to get one of those “credit” cards that you load up with cash. I was routinely putting money every month on a Key Possibilities card, and using that card for things like online shopping, expenditures I didn’t want to carry large wads of cash for, or traveling.
The downsides are that a) you can’t keep loading the card - once it’s gone, it’s gone, and b) you can’t download any information on your transactions (although you can call in and see how much money you have left/dollar amounts of what you’ve spent.)
I’m now using a credit card with a deliberately small limit for this purpose instead now, though - this way, I can download transactions and better track my spending.
January 3rd, 2007 at 7:31 am
For me, the convenience of tracking my spending automatically outweighs the risk I’ll use the card unwisely. I do the old “pay yourself first” thing, and my savings account isn’t accessible with the card, so it’s hard to overspend with my debit card. I only use cash for “purchased food” - thai takeout, a reuben at the new cafe in the nabe, etc., which makes my cash easier to track than when I was trying to do it on paper.