Better Budgeting: Cash Or Credit?

Mar 26 2012 @ 3:20pm

Seth Stevenson went without paper money for two months: 

Some folks swear by spending only cash because they "feel the pain more" than they do when they swipe a credit card. ([David] Wolman says economists refer to this as "the salience of the form.") It makes sense that people would want to avoid credit card debt in the simplest manner possible: by limiting their use of credit cards. But my spending experience was the opposite.

Those $20 bills seem to just float themselves away when I’m out on the town, while signing a credit card slip reminds me that I’ve contracted to fulfill a dead serious monetary obligation. I can also keep track of precisely what I’m spending my money on when I use a credit card and can even download that information into a budgeting program like Mint to analyze my outlay. Cash offers no such helpful record. (And let’s not forget those loyalty points. I buy most of my Christmas presents every year with the rewards from my Chase Amazon Visa.)