For uncontrolled spenders, cash-only may be the right lifestyle



Despite the benefits that credit cards offer -- convenience, purchase guarantees and points toward travel, cash and other rewards -- plastic is simply too convenient for some consumers to handle.

For debt-ridden, out-of-control spenders, tossing credit cards and switching to a cash-only existence, at least for a while, may be the best move possible to gain control of their finances.

People with "real spending problems," who avoid dealing with their finances, would benefit from living a cash-only existence, says Wynnewood, Pennsylvania, financial therapist Maggie Baker, author of "Crazy About Money: How Emotions Confuse Our Money Choices and What to Do About It."

"Everyone has a kind of intuitive resistance to having to pay for things," she says. "Using cash is a very concrete expression of the pain of paying as opposed to the credit cards, where you don't see the bill until the end of the month."

When making a cash purchase, Baker says, "You have the cash that you worked hard for in your hand, not just a plastic card that symbolizes your money with a bill that you get at the end of the month. There is an immediacy to cash" that people don't feel -- even with checks.

Fee-only financial adviser Rick Kahler of Rapid City, South Dakota, a credit card user himself, also suggests that those who overspend should switch to cash.

"I recommend going to all cash for those who are having difficulty [with] overspending. For those who manage their spending well, I recommend using a credit card. Why? To get either cash back or travel credits," Kahler says. "For example, I flew my family to London on points, which amounted to $5,000 in savings. Of course, this only makes sense if you pay off the entire balance on the card every month."

If someone has difficulty paying off those balances, "I recommend they cut up all their cards," he says.

Cards boost spending
Research supports the idea that paying for items with cash, rather than credit cards, curbs spending. A 2008 study published in the Journal of Experimental Psychology: Applied added to other research showing that the "pain of paying," or aversion to spending, is greater the more transparent the payment method, with cash being the most transparent type.

Using cash is a very concrete expression of the pain of paying as opposed to the credit cards, where you don't see the bill until the end of the month.

-- Maggie Baker 
Financial therapist and author 

The authors found that consumers appear to treat "nonlegal tender" such as credit and gift cards as "play money," and therefore spend more when using them.

"If the pain of paying increases with the transparency of payment mode, cash payments are more likely to be used for justifiable necessities and less likely to be used for frivolous luxuries which may accentuate the pain of paying," the authors wrote.

A 2001 Massachusetts Institute of Technology study suggests that people are willing to spend up to twice as much for the same item if instructed to use a credit card rather than cash.

So how exactly does someone give up cards for cash spending?

First, says therapist Baker, they have to become aware that they're out of control and admit they have a problem. "The person has to be willing to surrender to the truth of how they spend money."

No one should force a cash-only program on a problem spender, who will wind up feeling punished and resentful, she says.

Trying it out
"I wouldn't say to people that you have to do this for the rest of your life," says Baker. She'd recommend they try it for a month and see how it goes. Overspenders need to see the value they get from a cash-only program, she says. "You're much more sensitive to the amount that you're spending and you're much more sensitive to the fact that this is your money that you earned and you worked for."

The experiment presents a chance to examine what you really value in life, says Baker. Someone who has been spending $2,000 a month for lunch and dinner at restaurants probably wouldn't say that's high value, she adds.

After the month is up, the person can assess what he or she learned. "Was it helpful? Did it keep you from spending? What was your feeling, experience, of doing this?" says Baker.

She recommends that people with thousands of dollars in credit card debt sit down with a trusted friend, clergy person or financial therapist, go through their fixed expenses and see what's left. If possible, they should transfer balances to the lowest-interest card and pay off as much of the highest-rate card that they can afford.

Emergency card or not?
Baker and Kahler take different views on the question of keeping one credit card in case of emergency.

"I would always tell people that they need to have an emergency card and if they feel they can't trust themselves with it, give it to a partner, a spouse, a trusted friend," says Baker.

I recommend cold turkey. This often means negotiating a short-term payment plan with creditors.

-- Rick Kahler 
Financial adviser 

Kahler suggests that those who need to cut up their cards not keep one on hand for emergencies, "as the definition of emergency often reduces to the point that the lack of discipline or planning becomes an emergency."

Kahler also suggests that those turning to cash-only spending go all-in right away, rather than trying to make a gradual transition. "I have not seen anyone successful at a moderated pace of reducing usage," he says. "I recommend cold turkey. This often means negotiating a short-term payment plan with creditors." 

Not having a credit card can make it more of a challenge to make travel arrangements, but not necessarily impossible. Debit cards, PayPal and cash may work in some instances, although it could take more planning and paperwork.

With extra effort, travelers, in some places, should be able to rent cars using debit cards, (See "12 tips for getting a rental car with a debit card"). Some rental agencies may require that debit cards have a Visa, MasterCard or Discover logo. Travelers also may be able to rent a car with cash.

Travel sites also offer leeway on payment methods. allows payment with credit or debit cards, PayPal or Google Wallet for those paying for hotel rooms online. allows credit or debit cards, PayPal or bitcoin to pay for hotels online and for most cruise bookings, according to the site.

"Of course, there are more limitations and risks with a debit card," says Kahler, who compares excessive spending to an addiction. "The hassle is a consequence of the problem. It's hard to come up with a scenario that lets an alcoholic drink while abstaining." 

Get support
People who turn to cash spending to get their finances on track need not go it alone, and need not forgo a bit of fun.

Baker suggests they build weekly rewards into the program -- getting together with a friend and bragging that they've done something good for themselves, watching a movie or reading a book -- something that re-energizes them.

"Interpersonal interaction and getting affirmation and support from friends is usually something high on people's list that they feel really good about," Baker notes. She recommends finding a buddy to go through the process at the same time or to offer emotional support.

While people generally shouldn't reward themselves by splurging, says Baker, they might take something they don't use, sell it on eBay and use the proceeds to buy something fun.

Kahler offers this bit of advice: "People going cold turkey need to seriously consider having a financial therapist engaged. This isn't about the money, it's about a person's poor relationship with money and most people are not going to do this alone without help."

The Financial Therapy Association offers an online tool to search for a financial therapist.

See related: Financial heuristics: Creating money rules to live by, Video: Putting your credit card on ice

Published: June 24, 2015

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