According to a study I saw a while back, people are likely to spend more money when shopping with a credit card than when they use cash. It's a psychological thing. When you have the hard cash in your wallet, you don't want to waste it. When I used my debit card to shop I remember I used to spend a lot of money but when I started withdrawing the money I was to use for shopping, I was less eager to spend as much money. You guys ought to try it. Test out the theory for a month or two and note the difference.
Much as I would agree that it is very likely that people do have a tendency to spend more when using a credit card - I can't say that I would entirely agree - with the theory regarding making savings by only paying with cash. Particularly as - because no one individual is the same as another - I doubt that it would be a one size fits all solution to spending less - for example - it would make no difference to me whether I used cash or my debit card - simply because - regardless of how I'm paying - as that money comes directly from my bank account - I will still spend the exactly the same amount - as I will always only buy what is needed and can be afforded - whereas if I were to let my SO loose with this theory - as money tends to burn a hole in his pocket so to speak - it would more than likely have the opposite effect - especially as - being an impulse buyer - it would probably encourage him to spend more - rather than spend less.
I'm not sure with the exact figures but from what I remember, credit card purchases are subject to 2.5% interest every month based on the balance. That's why you can really save money when you don't use your credit card and pay in cash instead. However, there are advantages to the credit card. It is risky to bring cash because criminals are one step ahead of us. With the credit card, criminals can't get anything from me.
I I think that is an excellent suggestion. I think it is something that has been proven by studies. I think it has something to do with actually handing over the cash. The plastic seems so impersonal and it is just easier to spend more. I may do that this week. I think it would ineed cause me to spend less, and God knows, I need to!
I use cash to control how much I spend and when I spend it. When the pocket is empty you can not reach in and take out what is not there. Often I will not have any money on me or a card to avoid being tempted when I know I can not spend what money I do have on anything. The flesh is weak.
I used to to this years ago. My husband and I were just starting out in our careers and we had just bought our first house. We were on a very strict budget and to help manage my spending I only took out a certain amount of cash from the bank every two weeks. That cash was spent on groceries, gas and incidentals. It really kept my impulse spending down, I would recommend this for anyone trying to save money or stick to a budget.
That theory is actually true, even if you directly use your Paypal funds as opposed to cash, you will notice that you will tend to spend more using Paypal or other methods because the cash is not directly in your hands. There is something about being able to physically hold the cash that makes us more aware that it shouldn't be wasted.
I used to always use my card because I was living off next months wages. Now I use cash where I can, because I need less and also I spend less. I use cards for big purchases, but I used to use the card for everything to get points, but to be honest it wasn't really worth it all the time. I try to keep small notes and change so I can pay the exact amount at the till and I am more aware of what I have spent. It's the same at self-checkout, I know what I am spending versus handing over cash or a card to a cashier and wondering if the bill is right.
