Something about switching to a cash only lifestyle is screwing with me. I’m less than five days into an experiment where I’ve put away all my credit and debit cards, and replaced them with the good ol’ US dollar. There are a multitude of reasons for eschewing the digital dollar: people tend to spend more with credit, tip more with a swipe, and purchase discretionary products.
Cash should be easy. I’m looking to be more frugal, and all the research suggests that cash (which is concrete) is harder to spend. Instead, I’m floundering and fishing for ways to better acquaint to cash. The reality: I’m having some trouble with the classic currency.
1. Cash Reminds Me Of High School
It’s been a long time since I touched the green paper known as cash. In fact, I haven’t really used cash since high school. I’m a Millennial with keen eye towards the digital world. I’m an avid Mint.com user and Ally Bank customer. Something about cash just doesn’t mix.
Cash is painfully slow for tracking purchases and spending habits. Whereas credit cards feed all the spending right into my Mint.com account, I have to sift through receipts and cobble together some patterns.
2. Stores Don’t Honor Cash
While every store I’ve ever been to accepts cash; in reality, they don’t honor it. What do I mean by that? Well, cash saves corporations lots of money in transactions fees associated with swipe commissions. Visa, Mastercard, Discover, and American Express all make a cozy living through transaction fees.
When you receive 1 to 2 percent cash back on some credit card, the issuer is just cutting you in on their profits. Cash consumers get the short end of the stick, though. As I carry in my awkward wad of bills, the store clerk accepts it at the same price as credit purchases. For instance, that $60 pillow at Target costs $60 in cash and $57 for someone with a RedCard (comes with a 5% discount). And even though a major corporation loses a significant amount of profits to credit card purchases, they don’t offer any incentive to use cash.
Likely, stores still benefit from tracking credit card numbers. Even though Walmart doesn’t have a store card, they track all purchases and try to predict buying behavior in its customers. If you use the same credit card, they can effectively track your every move. Again, cash consumers are punished and receive goods at a 3% premium.
3. Cash Is Cumbersome
Maybe I’m psychologically weak or overly complaining, but I hate carrying around cash. Not only is it a flight risk – anybody can walk up to you and steal your cash – but it just fills my pockets with an unnecessary jingle that reminds me of the Salvation Army working a storefront.
With credit and debit cards, my minimalistic dreams were wonderfully clear and easy. I could reach into my pocket and quickly grab what I needed it. Now, I’m sifting through bills and change – searching for the appropriate denomination. I’m clumsy.
4. I Need An ATM
It feels stupid searching for an ATM. Everywhere I go, I’m looking for one. Even though my checking account offers free ATM withdrawals anywhere in the country, I feel held back by the need to find one.
There have been a few times where I literally ran out of money, and without an ATM visit, was unable to make a purchase. Now, if this was an unnecessary, discretionary product, this would be the perfect example of cash’s frugal ability. Instead, I’m left choosing between groceries that I can or can’t buy.
5. Where’d The Time Go?
Cash transactions, ATM visits, and spending errors (at least early on) have slowed me down immensely. I feel like I’m losing time in my life by constantly dealing in cash.
Just a couple days ago I parked in a local lot. As I made my way to the exit and payment station, I had to go into a full “cashier” lane – bypassing two “credit card only” lines that were empty. The extra time seems exorbitant and useless. I find a particular frustration with the process.
I’ll be curious to see whether you actually spend less money.
As for your point #2, that stores don’t give you a cash discount, that is almost universally true. The only places I have seen that offer any cash discounts are gas stations. And even then it might only be a few cents per gallon (1% of the purchase price roughly). No thanks, I’ll get my 2% to 5% cash back on my credit card and a month and a half interest free loan on my credit card. I felt so strongly about using a credit card instead of cash in order to make a buck or two, I added up what you could save by using credit over cash. Many can save a thousand bucks per year! I even wrote a blog post outlining how much you can save: http://rootofgood.com/charge-everything-on-the-credit-card-most-bizarre-financial-advice-ever/
And I’m completely with you on convenience of credit and how easy it makes tracking your expenses by having your transactions automatically post to mint.com or Personal Capital. So easy. I hate spending cash and having to manually enter cash transactions.
Justin,
Thanks for your thoughtful reply. I agree with you that credit card discounts and interest free money is quite a benefit. Credit cards can be an incredible convenience, too. No longer are you waiting in lines and fumbling around for the correct amount of cash – you always have it with credit. That being said, I’ll be writing about some positives about using cash very soon!
Stay tuned,
Sam
I think the original point was to spend less by using cash. The only way to do this is by making a weekly budget and only spending that amount. That means that when you run out of the green stuff, that’s it, you stop spending. Just fill your wallet at the beginning of each week. A budget isn’t a budget if you keep coloring outside the lines. The money you “save” by using credit cards is an illusion. What you overspend by using credit cards negates any perceived advantages. This is just my humble opinion, but it has worked for us for over 8 years now.
Kayi,
You’re right, here’s where budgeting becomes essential. Incorrectly accounting for purchases isn’t really possible. The problem arises from just not wanting to carry more than is absolutely necessary in cash. Unless you have spot prices for groceries, it can be difficult to account for the true cost in store.
Overall though, you’re right. I needed to better account for my purchases and then withdraw the appropriate amount in cash.
Thanks for pointing this out,
Sam
Not to mention all of that annoying spare change!
Nick,
Tell me about it! Can’t stand it… Hah!
Sam
The problem with ATMs now is that you have to find specific ones to avoid fees. At least in the beginning you could use any ATM without it costing you money. Now, I have to go to a specific ATM in order to avoid fees.
Jon,
This depends on what bank you use. With Ally Bank, as mentioned, you never need to fear an ATM fee – they will cover it!
Sam
I’ve tried using cash, but it doesn’t work for us. If we go over the right amount in the grocery store, out comes the credit card.
That is what we would do. If I see something on sale that is a good deal and that I will actually use, I’m going to buy it. Otherwise I’ll end up paying more later. Or spend even more going out to eat to get the same kind of food.
Gas stations often have a cash price and a credit card price (where the incentive is given to the cash customer). It’s hard to think of other scenarios like that though.
B&B,
You’re right, gas stations are one of the last bastions for cash purchases. They are still one of the highest cash zones for any businesses. Oftentimes, the discounted gas stations seem to be on trucking roadways.
I’ll be talking about a few more positives in an article soon!
Thanks,
Sam
Are you guys seeing cash discounts more than 3-4 cents per gallon (or about 1%)? I occasionally see cash discounts, but that is about the highest I have seen. I can get 8 cents off a $4 gallon of gas with my 2% cash back card. And a free 45 days of float before I pay the bill. And I don’t have to go inside the station to pay, thereby saving me a minute or two.
Is gas an area where paying cash would really reduce consumption (the goal of going all cash)? I mean I try to limit driving and run 2-3 errands if I’m out, but whether I hand over a twenty and a ten to pay for my tank refill or see the digital 30.00 at the pump, I doubt it will change my driving patterns. It’s a lot of money either way.