Why Paying in Cash Is a Better Choice Making purchases with cash can strengthen your ability to budget, save and invest your money. But with so many books on personal finance that are packed with as many tips as possible, it's hard to put even a few principles into practice. Sure we'd all like to spend less than we make, but with credit and debit cards as convenient as they are in a world of hectic schedules, we don't always make the time to go to the ATM machine for cash even though we should. Thanks to credit card companies targeting consumer vulnerabilities, we live in a plastic paradise. You can customize your credit card with the graphic of your choice. With the exception of a few mom and pop stores, most credit cards are accepted as cash. Your personal identification number (PIN) usually protects your debit card and with a signature and sometimes a PIN too your credit card is protected. But with cash, the only protection is your ability to defend it should someone want to take it from you. But regardless of the conveniences debit and credit cards afford us cash is still the better choice for making a purchase. Credit and debit cards give consumers a false sense of security, encouraging us to spend more than we intend by giving us access to more capital. For people who make purchases with cash, spending more than they intended means a trip back to the ATM to get more cash before going back to the store to finish their purchase. During the trip back to the ATM they have time to weigh whether their budget can handle the strain of this purchase. When you carry cash you're better prepared to pay for a given product and not for features you don't need. By paying with cash you'll avoid over-shopping. A Dunn & Bradstreet study found that people who used credit cards spend 12-18% more than they did when using cash. This is why making a list of things you need before you go to the store and carrying only enough cash to cover those items is the best way to stay within your budget. Motivated shoppers also look for discounts or use coupons to make the cash they have go even further, saving enough cash to buy themselves a luxury item. Aside from encouraging us to spend more, credit card companies also make it easy to only pay a minimum balance every month and then charging us 15% or more in interest on the remaining balance. Do yourself a favor and leave the credit card at home. In fact, you should leave your debit card at home too. Despite the overkill on ATM fees and foreign ATM fees, debit cards make it hard for consumers to track their money flow. When it comes to $2 here, $7 there, another $3 over here, it's easy to lose track of how much money you spent in a day, let alone a month. When your monthly statement arrives in the mail it's no wonder you're shocked and by then it's too late to do anything about it. With cash you can literally see the damage as it is being done and hopefully curtail your spending before it gets out of control. If you struggle with over spending, leave your credit and debit cards at home and only carry small amounts of cash. Big purchases that require a military loan will be avoidable, and you'll stay within your budget and avoid impulsive buys that are made easier with credit and debit cards.
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