Why cash is better than cards

There’s something unnatural about using a card to pay for purchases even though it’s what most people use these days.  Sure, it’s quick, easy, and convenient, but there’s a reason why some people who strictly use debit or credit cards struggle more financially than those who stick with cash.  Let’s take a look back at the history of trading and transactions to discover why.

The history of transactions

Money has been around for the last 3,000 years, but before that people used to trade or barter.  They would trade one good or service for another in order to get what they needed (i.e. livestock for lumber).  Eventually coins were introduced, then paper money. The first debit card was introduced in 1966 and became the most popular form of payment until this century when all kinds of new payment methods popped up – mobile pay, online pay, ACH, Bitcoin, Venmo.  The list goes on and the payment possibilities of the future are endless.

But why is this a problem?  Because these changes in payment methods have also changed the way our brains think about spending.  Before debit and credit cards existed, money was still viewed as a form of trade. You would walk into a store and find something you wanted to buy. Then at the register you would trade your cash for that item.  Psychologically, you understood and felt that you had to give something up in exchange for the item.

But these days when you get to the register an obvious trade is never made. Sure you swipe or insert your card and money comes out of your account or gets charged to your credit card.  But no physical trade takes place. The card doesn’t even leave your hand. And even though you know you just paid for that item, you don’t feel the same way you would if you handed over your hard earned cash.

Use cash envelopes

If you have a hard time controlling your spending, switching back to cash might be just the thing you need to start changing your ways.  Cash envelopes have become very popular for those who want to keep better track of their day to day expenses and who want to feel the pain of the cash leaving their hand in order to curb their spending.  The idea is to have a separate envelope for each of your variable expenses (such as groceries, gas, beauty, etc). Set a budget for each of these categories and track your spending throughout the month.

One of my favorite examples of the cash envelope method comes from fellow finance blogger The Budget Mom.  She even sells envelopes with beautiful patterns to keep you inspired and motivated.

The next time you take your debit or credit card out of your wallet, ask yourself if you would still be willing to pay for what you’re purchasing if you were paying with cash.  If the answer is no, then it’s time to make the switch back to the olden days. I guarantee it will make you spend less and your wallet will thank you later!