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.
Is this like that coin card coming out next summer? If yes, I would totally be interested in this!
In a way, it’s sort of similar! Coin can act as a credit card through button presses – switching to embody a different card. Google Wallet is its own bank card, but you can fill and refill from nearly any card or bank product. So it offers some serious flexibility. Coin is a terrific idea, product, but at around $100, that makes it awfully expensive.
I looks like Google is finally doing something with their Wallet feature. They have had the technology for some time, but finally made the jump to make it useful. I look forward to seeing how it does compared to all of the other great tools out there now.
I was excited at first as I thought you could link a credit card to your Google Wallet card for free and do an end run around stores that don’t take credit cards (like Aldi grocery store).
Unfortunately it looks like they charge 2.9% fee for funding from a credit card. Still not horrible if you wanted to use google wallet to meet minimum spending requirements on CC’s with bonus offers.
Okay, I really like this idea. I have a great idea and maybe you guys can expand on this and help give me input and direction.
I have been researching all kinds of budgets lately and I can’t seem to find one that I particularly like. The app Mint is great and has helped visual show where my money is going. My thought is to have a budget set up in google wallet. You can put so x number of dollars in a budget categories.
Example: Groceries/food. You put $300 then when you go to the store you log in to google wallet and select this particular categories and then pay so the money comes of of this “account” Same would go for gas you can put 200 in that account and then when you put gas in your car you select that categories and it withdraws from that account.
As I was reading this article it got me thinking. What if you could purchase this Google wallet card or maybe 5 of them with five different categories. Im not sure if this makes any sense but I would love to get your feed back.
Scott,
This is exactly how I envision the Google Wallet card helping! Unfortunately, you cannot get 5 of them; as of right now, it’s only one per user. I’m sure that if Google really want to expand into this biz, they could offer a feature like this.
I see the limiting effect of a prepaid debit card to be advantageous to those who struggle to stay within their prescribed budgets. This could definitely help.
Thanks for your comment.
This is what I am looking for as well! I have gas money, grocery money and discretionary splurge money but when it is all on the google wallet card in one lump sum it is harder to keep the different categories from blending together. If it had a way to keep the funds in separate categories I would not stop talking about it.