Wednesday, January 5, 2011

A Cash Experiment

Apparently, consumers spend more when they use a credit card in place of cash. I have read about this over the years and while I can't find hard evidence online backing this theory up, I have decided to do my own study.

We use a rewards credit card for almost every purchase we make. Every 12-14 months, we receive a rewards check for about $250 and put it into our vacation fund.

While $250 is certainly nice, it really isn't a lot of money anymore. Could I save even more money if we stopped using credit cards altogether and started using cash? By using a credit card, has it become too easy to put an extra book, t-shirt or bag of pretzels into my cart? And that pesky Target now offers 5% off when you use their Target Visa card on purchases at their store. The check that I write at the end of every month to pay off the credit card is not so nice.

How much money could we save if we start using cash? I have identified 3 categories that I am going to use cash for instead of handing over our credit card: groceries, restaurant meals and clothing. When I deposited our paycheck on Monday, I took out cash for these categories for the month.

These are categories that I feel I can reduce our spending. I let our grocery bill creep up this past fall. We enjoy eating out for dinner once a week, but those bills have also gotten a little high. We actually spent less on clothing in 2010 than 2009, but after looking in our closets, I just can't think of anything that we truly need. They are all pretty full.

My problem will probably be remembering to take the cash with me when I leave the house. I have used credit cards for so long that I'm not used to having cash in my wallet. I actually don't like carrying around a lot of cash. But I am committed to this experiment and I can't wait to see how well I do at the end of the month.

How do you pay for your purchases? Cash or credit?

If you would like to receive FREE updates of FBS, there are four ways to do so:

This post is linked to Frugal Friday at Life as MOM.

Image: luigi diamanti /


  1. This is something we're currently dealing with as well. We have always paid off our credit card in full every month, but over the last few months, the bill seems to be creaping ever higher until I have to make a couple of payments a month (still paying in full before the due date) to cover it. I don't like that feeling one bit and feel a bit enslaved by it. I know Dave Ramsey advocates cutting up credit cards and using cash and/or bank card for everything. However, we do disagree with Dave on that point. Because of the money we earned back, we were able to do much of our Christmas shopping for "free". But like you said, how much more are we spending to earn those rewards? For a period of time, we've decided to use it when we buy gas for the car and for everything else we'll pay cash or use the debit card. Right now, I feel like I'm behind all the time.

  2. We pay for almost all of our purchases with cash, but you are right, it is hard to remember to bring the cash all the time! I am curious to see how your experiment goes. I use cash for the very reasons you mention, but I always wonder if it would be better to use the credit card and get the rewards.

  3. We are trying a cash system for groceries this month. I will let you know how it goes!

  4. I started using cash for gas, groceries, and hair/nails. I used to never get my hair done because I never had the money. Now that I've been budgeting for it, it feels awesome! I feel better about myself. For gas, I leave the money in the car (kind of in a hidden spot). I get enough to last until next pay day, and so far I've had overages. For groceries, I've also had overages. I keep the cash in my wallet. No one knows that you're carrying cash, and I sometimes put the cash in my pants pocket right before I go into the store. That way I don't have to open my purse at the store. I need to work on eating out. I spend way to much because I use my debit card for that. Need to put that on a budget as well. Fortunately, since I'm able to earn gift cards on my blog, I use those to pay for clothes.

  5. Hi Im new here cant wait to see how you guys do I use my debit card dont have any credit cards anymore trying to cook more from scracth these days and useing up what is in the freezer.I will be starting plants for the garden the end of Jan.hope everyone can save a lot Karen

  6. I'm doing exactly the same thing this year. Cash only. I still let my husband use the credit card for gas and when he buys groceries (he does it so rarely). I also had the Target dilemma this weekend (that 5%). I used the Target card and then took the cash out of my purse and put it away for next month. I'll pay the credit card bill and then take less cash out for the month. Will also do that for anything my husband charges. I think it will work, and also will ultimately save me money. I'll miss that $200 in rewards though. But something's got to give here.

  7. Just an FYI about Target. You can apply for a Target branded debit card and get the 5% off when you use that and it is still like using cash or your regular debit card. Just take a check and ask at the store for a checkcard.

  8. Thanks everyone for the comments. It sounds like a lot of us are switching to cash in the new year. I wish everyone luck. I am convinced we can save more by not spending than what we are making in rewards points.

  9. We are a total David Ramsey fan and do not have or want credit cards. It was to easy for us to buy things we could not afford just because of the credit cards. No cash back rewards are worth getting into the the credit card debt problems of the past. If you do not want to carry cash leave it in the bank and use your debit card.
    Of course you need to always know what you have in the bank to avoid over draft fees that are stupid to have happen.We have signed a paper at the bank that if we use debit card and there is not enough money they are not to allow it to go through.
    The way we live on a budget is to use the cash envelopes. If we have cash in the grocery envelope we can shop . That way we do not creep up in that catagory and if I want something at the store and no cash left it has to come from the entertainment envelope. makes me shop with a list and a menu plan for the week. I will never go back to being a slave of the credit card companies. I save for what I want.


Thank you for reading Family Balance Sheet and taking the time to leave a comment. I love to hear from readers.