After reviewing October’s expenses last week, I decided that November would be a good month to experiment with a cash-only philosophy. Some studies have shown that in general, people spend less money when their only option is cash or that the use of credit cards inspires additional spending.
Most of the time, these studies simply compare the average credit card sale at a store with the average cash sale at a store, see that those who use credit cards have a higher average total, and conclude that the difference is due to method of payment. I’m not completely convinced, but I do accept the general premise that the use of cash — handing over green money — has a psychological impact that’s minimized when you had over plastic only for the card to be returned to your wallet.
So far, most expenses for which I usually a credit card — to track my spending and to earn bonus points — have been paid with cash. Every weekday, I purchase lunch with my coworkers. The total cost of lunch hasn’t changed now that I’m using cash rather than a credit card. I still buy the same food. For dinner, I’ve generally been eating food I’ve had in my house rather than going out or ordering in.
On Friday night, however, I slipped and ordered delivery food for myself and my girlfriend. I ordered dinner online and to do so, I needed to use my credit card. I could have called to place the order rather than submitted my request online, or we could have opted to eat food in the house.
Since my credit card is also used to pay bills such as cable automatically, I won’t be canceling the payment service and return to writing checks. My cable bill will be the same whether I pay by credit card or check.
The biggest challenge for me is planning my cash withdrawals properly. At this moment, I have only $5 left in my wallet, and I’m going to need to fill up my gas tank soon. When I withdraw money, I need to keep my car in mind.
I will be traveling to the west coast for Thanksgiving this year, so if I intent to continue this experiment, I will have to bring a significant amount of cash with me. I don’t believe the banks I use have branches where I will be staying.
Updated May 26, 2009 and originally published November 9, 2008.