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Your Take: All Cash Users, Why Do You Do It?

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After the recent economic meltdown, a lot of people decided to cut up their credit cards and go to an all cash lifestyle. Whether it was self-preservation or just anti-big banks, a movement that started at least a decade ago has really picked up steam and been the subject of a lot of press lately. I’m a big fan of credit cards, for all of their conveniences, and it’s sometimes harder for me to see the reasons for going all cash, but I know that there are plenty.

If you think I’m here to say “learn to use credit card responsibly and you get all the benefits!” – I’m not. First, I’m not so arrogant that I think I should ever tell you what to do. Second, I recognize what credit cards are and the reality that they aren’t for everyone. Credit cards can be a very useful financial tool and they can be a very dangerous financial tool. The fact that there are people with $10,000 in credit card, let alone $20,000 or $50,000, is a sign that credit cards can be far more dangerous than they are helpful.

A lot of personal finance writers like to liken it to a tool like a shovel or a hammer. I think that gives credit cards too much, well, credit. I think credit cards are more like alcohol. When used responsibly, both can make life easier and more entertaining (though neither are required for a more entertaining life). When used irresponsibly, the results are disastrous. Having $10,000 in credit card debt isn’t like accidentally hitting your finger with a hammer, it’s more like waking up hugging a toilet after a night you can’t remember. People get addicted to charging everything to plastic, much like they are addicted to alcohol, no one is addicted to digging holes in the ground with a shovel.

That said, I can’t imagine going to an all cash lifestyle but I want to better understand why some people choose to be that way. If you’re an all cash adherent, please share your experiences and your motivations! If you’re not, tell us what you feel about going all cash and why you choose to use credit.

{ 30 comments, please add your thoughts now! }

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30 Responses to “Your Take: All Cash Users, Why Do You Do It?”

  1. John says:

    Hi Jim, my sister and her family got in over their heads with credit debt and did exactly as you described, credit card confetti. They have no discipline when it comes to spending and their life styles and taste prove it. I think that they are better off using cash for everything.

    I have never had any debt other than my home mortgage that I paid off in 6.7 years. I use credit cards for all purchases and I have never paid a late fee or interest. The amount of air miles and hotel points that I have accrued is astounding. I have well over 350,000 points/miles combined with sign up bonuses and purchases.

    Using credit responsibly has rewarded me handsomely. My sister has paid a lot of interest on credit and it has punished her for lack of discipline. What kind of personality type you are really makes a difference on whether or not you should use credit.

    PS: Hi Jim, I enjoy your website and hope you have a nice weekend.

  2. Sharon says:

    Actually, when I only use cash I spend less. I know what I have to spend, and no more. When I use a credit card, I tend to not worry so much about what I’m buying. As convenient as it is to use a credit card, cash is still king.

    There is another reason I hesitate to use a card. I care about local businesses, and I want them to get ALL of the money. When I use cash they do, but when I use a credit card, they have to pay a transaction fee to the credit card company, lessening their profits.

  3. MD says:

    i hardly ever use cash as I like getting my 2%-5% cash back award plus I like having the trail of where my money went rather than having to handwrite everything down. Being all cash would be good if one was to go on the lamb or off the grid.

    • Matt says:

      I agree buying with a credit card gives you more protection and benefits if payed off on time, which isnt hard to manage.

  4. I want the rebates. We all pay for them anyway.

    Pay card balance in full every month.

  5. mannymacho says:

    I’ve never been on an all-cash lifestyle (except when I was a kid, obviously), but cash will definitely always have its place. It’s one way to guard yourself against credit card fraud and identity theft…it’s pretty amazing how much credit card fraud there is in this country, and how little is done about it.

    • Vic says:

      On the other side of the coin, if your wallet gets lost/stolen, you can’t call the US Treasury can get your money back. 😉

      I only take cash when I am going somewhere were they only take cash or if I’m at a place I can haggle like a flea market.

  6. billsnider says:

    I try only to use credit cards to get the miles and cash back. I also pay my balance every month. Never paid interest. So in my case it is the best way to go to get a little extra.

    Bill Snider

  7. Paula says:

    Hi, I am German and new to the country. Whilst all kind of cards are available in Germany we still use much more cash on the everyday basis. At the same time we get paid monthly and all bills are on standing order, so we check the bank account probably once a week or less…
    having cash in the hand is exactly that. I have it in my hands.. this sensation let us spend less…
    Now I am in the USA for 4 months and my wallet is full of reward cards. Yet I accepted only those which came without a credit card! As foreigner being used to have one ‘payback card’ which works in nearly all shops in Germany I am now learning to use coupons, check for coupon codes, use rebate sides and watch the points grow on my debit card reward system and trying to get all at adaptu under one hat. That is a full time job in itself. Guess it becomes easier with time.

  8. freeby50 says:

    Nice analogy you make comparing credit cards to alcohol.

  9. Abby B says:

    We use cash only because it’s our only option as we live in a country that hasn’t caught onto the debit/credit card fad.

    I think we’ll stick with it after we’re back in the US though, because I can tell we spend less money, and we’re more aware of what we spend it on because we track our spending by hand here.

    It’s taken time to get used to, but so far it’s working out well for us!

  10. Hunter says:

    I mostly prefer plastic. Seems to be more efficient for me. I generally come unstuck when I need to find $2.15 for the kids to buy lunch at school on Wednesdays.

    Looking forward I can see more smartphone transactions, and barter too. Cash is fast losing value.

  11. Bey says:

    Good presentation of pros and cons — but one angle that hasn’t been discussed is the cost of producing cash. It already costs more than face value to make a cent or a nickel, and even though it still costs less than 10 cents to make a dollar bill, its life expectancy is less than two years. Making cents just doesn’t make sense anymore, and the American public refuses to embrace cost-effective dollar coinage to replace bills. Heck, when was the last time you saw a 50-cent piece?

    I actually kind of liked using the larger value coins in other countries I’ve visited, because they’re well-designed, but that too has its limits. If there’s anything I hate worse than a stack of overused and overfolded bills in my wallet, it’s the weight and noise of coinage in my pocket.

    For some, a cash-only lifestyle may make sense, but from my perspective cash is just costing me more — with the government paying more than a penney to make a penny, and paying the mint to punch out millions of dollar coins that no one uses.

    Disclaimer: I am a numismatist. But in this vein I regard coinage as a quaint anachronism. I love my credit and debit cards.

  12. daenyll says:

    I tend toward credit cards, as I get rewards and it’s easier to track spending if I don’t immediately write a purchase down or there’s a bunch of smaller one’s in a day and I forget before getting back to my budget spreadsheet. It’s also easier to recoup/prevent loss if I happen to loose my wallet or it get’s stolen. I used to use cash though as I prefer to spend only what I know I already have saved and I dislike writing checks or having a debit card with direct access to an account.

  13. Navdeep says:

    hello, great conversation. ever since february this year, i’ve been spending cash only to track my spending and save money. i am planning to buy a new (new to me) car, and wanted to save as much as possible for the down payment.

    lo and behold, i just got laid off, so all this cash on hand is giving me a lot of security now. it could have been much worse.

    so, probably for the next few months, i will stay cash only — because it really makes me think about what i am willing and unwilling to pay for.

    this is when “every penny counts” really means just that!

    in the past, i have loved all the rewards cards and have accumulated many many miles for amazing international trips. but, i am happy to put all of that aside for the time-being. the reward is in paying attention at this time.

  14. Heidi says:

    I must confess. I am one of those people caught in the credit card cycle. I try my darndest to pay it off, but inevitably some unforseen event occurs and it’s back up again. I used my cc as an emergency fund. Currently I am setting aside funds for an emergency fund and trying to pay the cc down. Fortunately, I have just one so it makes the job easier. I am down to 5000 from 7500. I’m hoping to have it payed off in 20 months.

  15. Jason says:

    A decade ago I had way too much credit card debt from a failed marriage that took me several years of living ‘lean’ to finally pay off. I know from my own experiences that if I had only one credit card and, say, had to get a set of tires (not something that can wait for a save-up), I wouldn’t think twice about throwing that $700 on the card, but not having to be paid in full each month, it would carry over til the next month. Then the motivation to carry a zero balance all but disappeared and the debt mudball would start gaining momentum again, this dynamic was exponentially worse with multiple cards. I’ve been cash only for a couple of years now and am just beginning to dip my toes in with one rewards card. The difference now is that I have enough disposable income to know that I can pay it off at the end of the month, as well as enough savings that I dont have to rely on it.

  16. Gary says:

    A married couple I know switched to an all cash lifestyle. They had $25000 in credit card debt and just bought a $33000 SUV!

    When thier finances crashed around them they cut up their credit cards and went to all cash. A kind of an envelope system where if there wasn’t any money left in the food envelope, they didn’t go back to the food store until payday.

  17. Joe says:

    We try to use cash more often because it helps us stay on our budget better. If you go to the grocery store, you can’t overspend if you simply don’t have the cash in your hand/wallet. Also, I’m feeling pretty anti-bank at this point, so why do anything to help their business?

  18. cubiclegeoff says:

    Using cash would probably help me stay on budget better, but the little I may go over budget on one item isn’t going t break the bank, so it’s not a big deal to me. It’d be more of a hassle trying to get money out all the time and making sure I have enough cash. Credit cards are just easier, have a bit more protection, and I get the rewards, so it’s all worth it for me.

  19. zapeta says:

    I hardly ever carry cash or even write a check, but I put most of my spending on a credit card. I have full fraud protection and I get a rebate on what I spend so it makes sense. I’ve never carried a balance so that isn’t an issue. However, I think people tend to overspend, something you can’t do when you use cash.

  20. skylog says:

    i can see where there could be benefits if you need some help staying on budget, but i prefer to at least get a little something here and there using my rewards cards. while i would have trouble going all cash, i do respect those that take that route.

  21. dave says:

    Using cash or a debit card is better than using a credit card. Some people who spend more than they make have no choice but to use credit cards similar to congress.

    With a debit card your computer will cost you $1,000 but with a credit car it will cost you $1,000 plus $100 of compounded interest. I think it’s better to pay $1,000 instead of $1,100 for the same thing.

  22. Strebkr says:

    Just got back from 10 days in Europe. American credit cards don’t work so well there as we do not have a CHIP in ours yet. So I had a makeshift cash trial period. I liked seeing how much I had at all times. It was hard to part ways with it, so maybe I did spend less. But the drawback was that my receipts and tracking of my spending was crap. So who knows how I would do if I did all cash here in the states.

  23. Jim C says:

    We use cash for most things because we spend less on useless “stuff” and tend to get better prices than we do when we use plastic. Plus, I dislike leaving a computer record of my purchases and travels with the credit card company. Far too many organizations have access to those computer records for my comfort.

  24. Andrea says:

    We have used cash/debit cards for a couple of years now and credit for things like emergency ACL surgery for the dog. We are doing just fine and seem to just buy things that we can afford without a credit card hangover. We make more frugal and thoughtful choices now that we use the debit card rather than credit. We can’t afford to go to Hawaii but can have a nice weekend in Napa cash only and not have a bill to pay when we get home. I dont feel like I lack anything not having a credit card. We just paid for Christmas all cash and most everyone I know put it on plastic. Those who pay it off each month are the exception. One less bill to pay off each month. It is what it is.

  25. Sadie says:

    Use the “right” credit card wisely by paying in full each month plus you will have rewards/bonus coming to you.

    If self-employed & accepting cash on the side, think how you end up cheating yourself. Social Security will pay you for reported monies for perhaps the next 20 to 30 years.

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