Credit, Debit, Or Cash?
I’m constantly looking for ways to budget better, as it can be challenging in a new, digital epoch of swipes and signatures. Last month, I decided to follow Dave Ramsey’s advice and only use cash. For 2 weeks, I banished all credit and debit cards from my wallet.
Over the course of the experiment, I struggled to use cash. Despite all the whimsical benefits of budgeting via cash and envelopes, the good ol’ paper currency seemed antiquated and made for difficult money management. As a near-religious Mint.com user, all of my transaction history and spending trends were lost in the data-less use of cash.
Now, there’s a new solution called the Google Wallet Debit Card!
Cash Didn’t Work… For Me
Recently, I was interviewed by a writer for LearnVest.com that asked whether I was still using cash – had I made the switch more permanently after the experiment? I laughed and said, “No. In fact, I don’t have any cash in my wallet at all.” I haven’t really used cash as a primary payment method since middle school. When I got to high school, I opened a savings and checking account, and the debit card quickly replaced the greenback.
After the experiment, I was left floundering around the questions about how to budget better. As an avid swiper, I realized the consequences in spending that could occur. Researchers from MIT’s Sloan School of Management found that:
In studies involving genuine transactions of potentially high value we show that willingness-to-pay can be increased when customers are instructed to use a credit card rather than cash. The effect may be large (up to 100%) and it appears unlikely that it arises due solely to liquidity constraints. In addition to demonstrating the effect, we provide a methodology for detecting it, and our findings suggest a source of variance to test alternative explanations.
The Fourth Option: Google Wallet Debit Card
Yesterday, Google announced a perfect solution for the digitally-inclined: Google Wallet Debit Card. The card is just like any other; in fact, it’s a Mastercard with the power of Google. It can link credit cards, bank accounts, and loyalty cards in a neat little application for iPhone and Android. But now, there’s a new, physical card to help making shopping easy.
Ever since Dave Ramsey introduced the envelope system with cash to manage a spending plan, I’ve been looking for ways to incorporate that philosophy into my life. Google Wallet is finally that solution. The debit card uses the balance in your Google Wallet, which functions much like a PayPal account. Once your balance is empty or too low, the purchase won’t go through.
What Makes Me Excited About This New Product?
The Google Wallet Card operates much like a prepaid debit card, except it’s entirely digital, reloadable, and has hardly any fees. I have the power of a bank by utilizing Google Wallet’s features. I can send money to friends, receive payments, and now I can spend the money wherever I go.
The most important part is that it allows you to set strict budgeting goals for each week. For instance, let’s say I want to limit my food spending (groceries, lunches, and dinners) to $400 per month. If I load my card with $100 per week, and stop swiping after that – because there’s nothing left – I can effectively stick to my budget. Just like the envelope system, I’d know exactly how much is left (digitally) – no more, no less.