Today, a friend and I discussed the difficulty of really watching credit card spending. Like my friend, I put 95%+ of all my non-rent expenses on my credit card. We are both responsible credit users – we pay off our charges in full every month, and we use the card to get rewards like cash-back and gift cards. But we both agree that somehow, credit card spending seems to be subject to the “creep”, and the direction is often upwards.
The conversation got me thinking: am I prone to spend more paying with a credit card than I would be using cash?
Research says yes, and as much as I love my CC, I tend to agree:
Even though I don’t carry a balance month-to-month, a CC is just SO convenient that it’s easy to rationalize that “oh, it’s just an extra $20” and “oh, I’ll get rewards on it.” A $20 bill seems to be like a quite a bit of money. But a $880 credit card bill doesn’t seem that different from a $860 bill.
I don’t think I spend MUCH more using a credit card than I would using cash, but I’d be giving myself too much credit (heehee. pun intended!) if I insist that I haven’t been lulled by the CC into spending just a little bit more at times.
Still, I have no plans to give up the plastic. My credit card allows me added protection that I would not get with a debit card (virtual account numbers, low liability in case of fraud, etc.) and is way more convenient than cash. Besides, when my cash is gone, it’s gone. I have no idea where it went. At least with a CC, I have a statement and can keep track of my purchases.
Despite some valiant attempts in the past, I don’t really keep track of every penny either. My fixed expenses are what they are, and I have an idea of how much my credit card bills should be every month (below $800-ish) for me to make my savings goals. I have dollar-amount saving goals – as long as I make those, the rest of the money is mine to do as I will.
Do you think you spend more using a credit card?
Unfortunately I do seem to spend more with my credit cards than cash. Every month I look at my credit card statements and wonder why I spent so much money. Granted I pay off my balances, I always seem bewildered by the amount I spend each month. I’m in that stage in life where it’s difficult to balance my life, am I saving too much or am I depriving myself of a more enjoyable lifestyle? Maybe I need to search out some life balancing blogs ๐
I’m the same as you, in that I pay off my balance in full each month and like it for the protection and convenience.
but it is easier to pull out the plastic, knowing that it will go through.
I also have a money journal though in which I write down everything I spend (down to the lat penny) it’s become habit now, but it keeps me in check and on track.
My old flatmate and I had seperate goals of losing weight and saving money. She used to write down everything she ate and I everything I spent. It makes you realise how much the coffees etc all add up in a week!
Perhaps, I’m not really sure. I do balance my budget and payoff what I spent regardless of what that amount is. Before I go shopping I check my budget so I know how much I can spend. Then when I’m in the store I try to stick to that limit, if I’m going over I’ll sit there and figure out where I can take the money from before I spend it. I use the plastic to help with cashflow.
I spend less with a credit card because it’s traceable and holds me accountable (i.e. TheFieryOne knows if I spend frivolously with the credit card, and it’s embarrassing when you call yourself frugal and then spend unfrugally). With cash, there’s no record unless I keep one*. I used to spurn my sack lunch from time to time and use cash to get Wendy’s chicken nuggets (before I stopped eating fast food for 2009). I almost never did that with the credit card.
*If TFO ever asks, I always tell. But if she doesn’t ask about things like fast food, it might not come up. ๐
I feel the same as Bart. Cash I can spend and never think about again, but with a CC, it at least will show up in Yodlee in a day or so.
All my fiances are electronic, so to me, paper money seems almost less real. It is off the radar.
I do track my spending (to the dollar, not the penny!), which I think makes an impact.
Do I spend more or less? I have no idea, I’ve never operated on a cash based lifestyle.
I don’t have any credit cards but I still get the satisfaction of slipping my shiny debt card thru the register and hearing the APPRPVED beep. I often lose count of how much I spend which I don’t think would happen as much if I went with the cash option. But in my defense, I lose cash ridciously and have learned I’m much better off to not bother with it.
Serendipity
Nope. I don’t really spend more, I just don’t feel the pain as quick. When I spend anything, I pay it immediately online for the exact amount I spent so… I don’t spend more per se, because I tend to be more careful as I know I have to clear it immediately.
I definitely spend more when I use my credit card and I’ve also rationalized purchases in the past by saying, “Oh, I’ll get rewards for that.” However, as I also pay off my balance in full every month, I don’t feel too bad about it unless I go WAY overboard (it happens).
As for cash, I can sometimes go for a month or two with the same $50 in my wallet. I keep enough on hand for emergencies but don’t like to carry too much of it. If cash gets stolen, it’s gone forever; if your credit cards are stolen, you can freeze your accounts and you’re not liable for unauthorized purchases if you report your cards stolen right away. Now that’s security.
Although I like the accountability aspect of credit cards, I DO spend more if I am not careful. “What’s another pair of socks, or 6-pack of soda when I have plastic? I’ll need it anyway, right?” When I have cash I am most likley to stick on budget at the store. I don’t routenley have any cash on me becasue I know I will spend it. “It’s only 75 cents for that Snickers, no big deal…” Later I don’t know where my $10 dollars went. I am trying to not spend much at all. It helps to not carry cash because I have made a rule not to use my CCs for anything other than groceries and gas.
I’m pretty diligent in tracking my spending and have been doing so for a year now. I developed an Excel sheet using basic formulas that works for me, so overall I would guess that I accurately track 98% of my money. I keep all my receipts and try to jot down cash expenses. Usually what gets away from me is cash spending at restaurants, bars, and the Laundromat where I don’t get a receipt. It takes a minute or two per day to open the Excel sheet and update my spending. I don’t have to do it every day. I probably spend less than an hour per month.
I like to use my credit card, because I can always look up what I spend and because of points. Spending cash doesn’t give me any money back. Since I pay my bill in full every month, credit cards give me something extra that cash never can. It also gives me 30 days to keep money in the bank.
Updating my Excel sheet on a regular basis holds me accountable for where my monthly spending goes. Did I spend to much at the grocery store? Did I take too much out of my entertainment budget? I will recognize this right away and will be more careful. Where my cash goes is usually a conscious decision, because I how much I have left for the month.
I actually spend more when I have cash because I don’t track it. I try to keep about $20 in my wallet, but if I have even a little bit more, I tend to spend it.
With a credit card, I know I’m going to have to enter it into my spreadsheet later so I think I actually spend less.
Well, I’ve never tracked it but I’m going to say yes. I never have gobs of money in my wallet but with a credit card it seems I can always buy whatever it is in the spur of the moment.
like centsinthecity, i keep track of my spending with an excel spreadsheet. every category has a limit. whether i use my debit or credit card, i enter the transaction into the spreadsheet. that way i always know what my remaining balance of funds is for each category. i find that this keeps me in check.
but cash is just too easy to spend for me. i can’t use my card at vending machines. i’d feel foolish for charging a bag of chips at a convenience store. in my life, there are so many places to blow through cash, so i just try not to carry any or much.
Oh, definitely. I know I spend more with my credit card. With cash I have to think about the price of everything compared with the price of the item I want–to make sure I have enough money. With the credit card, I can too easily justify, “Oh, it’s only $2.”
I absolutely spend more with credit cards, which is why right now, I don’t use them at all. I’m just paying down debt rapidly and I only use them for plane tickets (for the liability factor you mentioned).
I used to work in retail and the first thing they say is to get 2-3 credit cards opened each day because people with our store cards spend more money in our stores than people just using cash or regular CC.
It’s scientific, it’s been researched and I’m not going to try to singlehandedly beat the system. LOL!
I recently (last 6 months or so) switched to cash only and I’m much more careful with what I spend my money on.
I never used to agree but I think you’re probably right. I pay for pretty much everything with my credit card and even most of my bills come straight out of it. It’s pretty easy but I’m just about to start moving things back the other way.
My bills are going to come out of a second ‘bills’ account (including my rent) and I think it’ll make it easier for me to figure out what my needs are from my wants.
I have the same views on CCs as you. I’m responsible and I pay mine off every month (I vow to never pay interest ever again. lol). I also use the cards with rewards.
You kinda hit what I was thinking in your last paragraph. I feel like I don’t spend more just because I have a CC because I use a personal budget spreadsheet to mentally prepare myself for what I should be spending…it really does help. I’m like you to – I fixed myself up an excel budget probably 5 times before I actually started consistently doing it. ๐ and I can say that I’m hooked now. ๐
I have the same views on CCs as you. Iโm responsible and I pay mine off every month (I vow to never pay interest ever again. lol). I also use the cards with rewards.
You kinda hit what I was thinking in your last paragraph. I feel like I donโt spend more just because I have a CC because I use a personal budget spreadsheet to mentally prepare myself for what I should be spendingโฆit really does help. Iโm like you to – I fixed myself up an excel budget probably 5 times before I actually started consistently doing it. and I can say that Iโm hooked now.
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