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Pros & Cons of Using a Credit Card-Only Spending System

non-cash systemWhen it comes to budgeting and spending money we all have our own unique plans. Some of us prefer to track every penny. Some people just go with the flow. Some prefer using cash-only, while others go card-only. I wanted to look at the pros and cons of a card-only spending plan.

First well start off by looking at the benefits of a credit card-only (debit and credit) system:

More protection. A credit card offers protection that you simply won’t receive from using cash. From extending your warranty to having to prove your purchase, a credit card can be much more reliable.

Easier to track your spending. When you use cash you have to count all of your spare change and what not at the end of the month. With a credit card all you have to do is load up your statement at the end of the month to see exactly where and how you spent your money. This way there’s no uncertainty about your spending. You get to see where and when your money was spent.

Easier to carry. Its much easier to carry around a card and keep track of it, then it is to carry around cash on you at all times. Plus if you lose cash that you have on you, it’s simply gone forever. If your credit card ever gets stolen you can report it and have everything resolved eventually. This is a benefit that can come in handy when you need it most (ask anyone that lost cash before).

(Quick note: of course credit cards can also be used to build your credit history. Cash can’t.)

Now after looking at the pros of a card-only spending plan, we can now take a look at the negatives of this system:

Cards create a disconnect. When you use cash for a purchase you have to physically hand over the money. For some of us this can be pretty painful and uneasy. Giving over cash for a purchase can be much more painful than a quick swipe. This is where the problem exists for many when it comes to using a card to make all purchases. A disconnect is created and it doesn’t feel like any money is being spent at all.

Easier to spend money. If you only have twenty bucks in cash on you, then you’ll only spend that much. If you have a debit or credit card you might be more willing to spend additional money. Think of all of the times that you’ve picked up an extra item or two when walking around with your credit card at Wal-Mart.

Another quick note is that credit cards are widely used online (from Paypal to eBay to amazon) and most sites will store your credit card information for you. It gets to the point where all you have to do is click on the product you want to purchase and confirm it. This system can be toxic for those that don’t have a grasp of their finances. However, this convenience is also important to those that value the ease of use for shopping that online merchants provide.

Now I understand that there will be polarizing  views on the credit card-only spending system. You could argue that the card-only system is more useful for those in the advanced stages of money management. Once you gain control of your spending impulses and begin to delay gratification, you can then trust yourself with using a credit card on a daily basis. The cash-only system is very useful for those that are trying to get a hold of their spending. Once you become the master of your finances you can begin to use a credit card for all of your purchases.

What do you use? Are you cash-only or card-only? Or do you mix up your spending?

(photo credit: fosforix [1])

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17 Comments To "Pros & Cons of Using a Credit Card-Only Spending System"

#1 Comment By Ray On October 21, 2010 @ 12:06 pm

haha, all that and you miss the primary reason to use your CC for all your purchases. (1%+ of all spending refunded).

#2 Comment By Briana @ GBR On October 21, 2010 @ 4:13 pm

I’m card-only. I always tell people I never carry cash. Once I break a $20, I can count it to be gone. All the pros you listed are the arguments I make when people ask me about it. The only time I have cash is in my car if I go somewhere that I need to pay for parking, but even more of those places, meters included, accept my lovely debit card 🙂

#3 Comment By jungle On October 21, 2010 @ 8:04 pm

I use CC for everything I can. Rewards and safeguarded against fraud purchases.

#4 Comment By Echo On October 21, 2010 @ 8:41 pm

I use a credit card for all of my expenses and I actually find that I tend to spend the cash in my wallet a lot faster then if I just used a credit card for everything.

Maybe it’s due to the fact that I know what my budget is and what all of my expenses typically are…and I just use cash for un-budgeted petty cash type purchases, which may be more frivolous.

#5 Comment By chad On October 21, 2010 @ 10:32 pm

cash is KING!

I pay cash for everything that way no bills or interest.And its paid for now cash then no purchase.

#6 Comment By Aloysa On October 21, 2010 @ 10:41 pm

I try to stay with cash. Credit cards make my life more complicated. I dont’ care about the rewards. they trapped me before so I try to avoid them.

#7 Comment By Mama Zen On October 21, 2010 @ 11:21 pm

I use both. When I travel for work, I use my CC so it is easier to manage when I get my refund from my employer. For my everyday expenses, I am trying to stay on cash, but I am doing this since about 2 months. Right now I cannot say that one is better than the other. What I can say is that I do agree about the CC disconnection… it’s easier to loose track of how much you spent with a CC (in my opinion).

#8 Comment By The Financial Blogger On October 22, 2010 @ 6:58 am


I prefer credit card and paying it completely every month (I like rewards ;-D ).

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#10 Comment By Tara On October 23, 2010 @ 7:26 pm

I find that it is far to easy to lose track of how much I spend with a credit card or cash. I always pay my credit card bills in full, but I found it difficult to track what I was spending my money on. Cash is too difficult to track since many places don’t give receipts.

I tend to use a debit card only system, except for expensable amounts and then, I use a credit card. I keep track of how much money is in my bank account and I am disciplined enough to not spend more than that in the month.

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#12 Comment By Jungle On October 24, 2010 @ 10:16 pm

Last year over a one year time period I redeemed something like $1500 in cc awards. Most of them being from the GM visa, PC points, smart cash and shoppers. I believe I even got $100 from a sony mastercard promo.

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I use credit cards only and never carry a balance and use ING to push the payments every week to the card so it is always paid in full. If I end up overpaying the card then the refund just goes back as a credit and everything is okay.

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