Thursday, March 15, 2007

Cash or Debit

Several years ago, my accountant recommended that I stop using my debit card and start using cash more often. I balked then, but over time I've really warmed up to the idea of using cash whenever possible. Using cash rather than a debit card has several benefits which this article will briefly cover.

First of all, using cash can make budgeting out of pocket expenses like lunches and random consumables from the store much easier than if you're using your debit card all the time. Using specific amounts of cash for different categories of spending, often separated in their own physical envelopes is old school budgeting the way our grandparents did it - and it works. Making purchases with cash also helps you keep a more tangible tally of what you're spending; handing over a hundred dollars in cash for something is considerably more dramatic than handing over a piece of plastic.

Finally, using cash doesn't just help you control your out of pocket spending better, it also acts as a safety buffer for the checking account to which your debit card is tied; if you've ever accidentally kicked in overdraft protection for this account due to a long weekend of partying, you know what I'm talking about. So if you're a debit cardoholic like I used to be, give cash a try for at least the bulk of your out of pocket spending - you might discover that you like the extra control and peace of mind that it gives you.