In years past, it wasn’t uncommon for someone to pay for groceries or gas with cash. These days, almost everything is paid for with a debit or credit card. While a debit and credit card serve two completely different functions, they may foster dangerous spending habits that could be rectified by using cash instead.
You Have an Emotional Connection to Cash
One of the best reasons to use paper money instead of a plastic card is because you have to physically part with it when buying something. When you have to reach into your wallet and hand it to a cashier, you are much more cognizant of how much you are actually spending. The transaction becomes more than just a number on a balance statement at the end of the month. Therefore, you may be less willing to spend more than you absolutely have to when at the store or at a garage sale.
Cash Doesn’t Come With Interest Rates or Transaction Fees
When you make a purchase with a credit card, you could be subject to interest if the balance isn’t paid off by the end of the month. If you use a debit card to pay for a transaction, you could be charged a fee by your bank. You could also be subject to insufficient funds fees if you overdraw your balance. Even if you have overdraft protection, you could still be charged a fee for each day your checking account is overdrawn.
Your Cash Can’t Be Compromised
No one is going to be able to link a cash payment to your financial institution or to anything else that identifies you. If someone finds money that you dropped on the street, it can’t be used to steal your identity or make purchases in your name. While it may be impossible to get cash back if you lose it, at least you are only on the hook for whatever you lost and nothing more.
You Won’t Be Compelled to Spend Too Much Online
Online lenders require that you use a debit or credit card to complete a transaction. If you only use cash to pay for items, you won’t be doing a lot of shopping online where many purchases are simply impulse buys or items that you don’t genuinely need. By sticking to cash, you only buy the things that you need or at least take the time to compare prices before you decide to make a purchase.
You Pay Off Existing Debts Faster
If you decide to make big purchases in cash instead of taking out a loan, you can avoid going into long-term debt while building equity in tangible assets. That may make it possible to leverage the value of your vehicle to obtain title loans or other loans using the vehicle as collateral. As these loans are paid back within 30 days of receiving the money, those who would rather not go into debt can repay what they owe fast and continue to build their savings.
While it may not be the hip or trendy thing to do anymore, it may be in your best interest to carry cash in your wallet. It comes without interest or fees attached to it, can’t lead to your identity being stolen nor can it be used to engage in online retail therapy. All of these attributes help you to control your spending and keep your debt to a manageable level.