Monday, January 12, 2009

Cards are King - Not Cash

Have you ever gotten to the end of the month and wondered where all your money went? Well, with a credit/debit card, you can find out. One of the easiest ways you can waste money is by carrying too much of it. Whenever you can, use a credit or debit card. Using cash to pay for things often results in loose change. The prices of things we buy are almost always decimal values, not whole dollars. When you use cash for these purchases, you're given back change.  Change is easily lost, undervalued and spent. For example, if you pay for a $15.25 purchase with $16, you get 75 cents back. Since it is less than a full dollar, people assume it’s really not worth anything. A single coin may not be worth that much on its own, but over time, it really does start to add up. How much change is dropped and nobody bothers to pick it up? They spend it much more easily than they would typically spend money. 

For example, let's go back to that purchase of $15.25. When you paid with $16, you got 75 cents back. 75 cents may not seem like it's worth that much. So next time you pass a vending machine, since you have the leftover change, you decide to treat yourself to the candy bar you wouldn't normally buy. This may not seem like a large waste, but let's say you make this same purchase every day and use the change at the vending machine. You may not notice it, but after a year you have wasted nearly $300, just in change! 

Also, let's say you have $20.75 in your wallet. Since you have those 75 cents as change, you are more likely to not count the change towards the total money you have. You only think that you have $20. The 75 cents is "extra" money, so you may as well spend it because it won't impact how much money you have. 

Using a credit/debit card eliminates this problem. You never get change back, so you never feel that you have this extra money that you may as well spend on frivolous purchases. All that money that you would have wasted is now all compiled into a sizable amount.

But the greatest benefit of using a card over cash is your monthly statement. When you spend cash, at the end of the month you have no log or way of knowing what you spent the money on. When you use a credit/debit card, your bank sells you a detailed report telling you everywhere you spent money. This is a great tool because you can sit down at the end of the month and see trends in your spending. Maybe you are spending too much money eating out, or spending too much money at the mall.  It allows you to see where you should cut back on excessive spending.

Cash can sometimes seem to trickle out of your pocket. Cards on the other hand give you control of your money. You can see where problems in your spending are, and what you need to do to fix them. And you also don’t waste as much money. Cards are king - not cash

1 comment:

  1. This is an interesting argument. I generally agree with you and charge almost everything, but I do think that some people are better suited to carry cash. Cash is more tangible and immediate than credit, and it's harder to go into debt if you only spend cash.