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Would It Be More Effective to Go Cashless or Cash-Only?

There are several ways that people trying to reign control on their spending go about making a budget, and some of these strategies involve going cash-only or completely cashless.

Personally, I use a combination of cash and debit card and it's worked for me quite nicely; in fact, it's hard to picture handling my finances another way. However, both the cash-only and cashless camps make good points about why taking their sides could work for someone seeking a new budgeting strategy to get her on track. Discover the differences when you


Those on team cash-only have followed the recommendations of personal finance guru Dave Ramsey and his envelope budgeting system. His system is straightforward and simple: It instructs that you literally divide your monthly paycheck into envelopes (except for bills paid by check or auto-withdraw), and once an envelope is empty you can't spend money on that category until next month.

Ramsey argues that relying on debit cards can cause you to spend more because there isn't the same psychological connection there is to handing over cash for expenses. Those who do go cashless retort that carrying cash can have the opposite effect of spending more and making more impulse purchases. They note it's easier to track spending by using a debit card between all of the online expense tracking and budgeting applications available along with standard online account visibility.

Which of these methods do you think is more effective? Do you have a unique system of your own that gets the job done?


Join The Conversation
Calimie Calimie 8 years
@Lynettes: I like your system of index cards. I do something similar: every week I take some money and goes into: wallet (for things I actually need), smaller wallet (for things I don't need but I want) and a set amount for savings. That makes me think over everything I buy and consider whether I need it or not. Taking out the smaller wallet feels like a punishment. That said, every few weeks I burn the amount in the smaller wallet to buy anything to avoid feeling completely deprived.
lynettes70 lynettes70 8 years
I found that I was doing ok in most areas, but had one or two "problem" areas- groceries & miscellaneous. So, I divide my monthly budget by 4.33 to get a weekly amount. I have 2 index cards- yellow for groceries, blue for misc. On Sunday, I write my weekly allotment on the card, stick it in my wallet, and then EVERY time I spend money from one of those categories, I subtract it on the card. When I am out, I can't spend anymore til the next week. This seems to work better than trying to stick to a monthly budget- I can usually wait a few days on groceries, but if I were over budget midmonth, it would be hard to stretch 2 weeks for food~
danandmarsh danandmarsh 8 years
I have found that we, me more so are using the debit card. I balance my checkbook ever other day or so. I using debit it seems we are keeping money longer than with using cash! Another question, I know so places do but when will places and banks start charging a per transaction fee, that's probably next!!!!!
lily8206 lily8206 8 years
I think that cash-only is more effective, but I personally use both (cash and credit).
loveyoulots loveyoulots 8 years
I love this subject because I am currently trying to figure this out for myself. I was a debit only person, but I spet to much and was always "surprised" when I checked my balance. I'm currently a debit/cash person as I hate charging items for $1,but also hate having large amounts of cash on me. So I like being in between. I can charge larger amouts and keep up with my balance and spend cash on small amounts and keep up as well. That debit swipping action is addictive and that's what made me want to change as well. I am more concerned when I hand cash to some1 and when I see it depleting I am more conscious onmy next purchase.
CoralAmber CoralAmber 9 years
I almost always use my credit card because I earn points for gift certificates to my favorite store. I *always* pay my bill off in full each month. If I can't afford it I don't buy it.
Dr-No Dr-No 9 years
I use credit cards primarily. This way I can easily keep track of what i spend o clothes, shoes, food, and other expenses throughout the month. I feel like i have better control because it's easire to keep track of my finances. Plus I buy almost EVERYTHING (but food) online, and its just crazy to use a debit card online!
Missy-Prissy Missy-Prissy 9 years
I use a little of both but only keep around $40 cash so I do use my debit card more often
graduatedsqueaks graduatedsqueaks 9 years
I only use my debit card at the ATM (to withdraw cash or put in checks). I use my credit card most of the time, and yes, I guess that allows me to spend more. But I don't really spend much at all usually, mostly on groceries, and it's more efficient with the price of gas these days to buy all the groceries at once than to limit myself with the amount of money I have on me. And since I pay off my bills each month, it's not hurting me too much, and I do earn cashback on my credit card, which is nice. I keep cash on me for when I might have to take a cab, or if I'm going out to lunch with a bunch of people (it's easier than trying to split among a bunch of credit cards), or if I'm going to a place that only takes cash (small cafes, farmers markets, etc.) I tend to spend the same amount per month regardless, unless I have to make a large purchase for some reason (I might have to buy a car soon, which will definitely hurt my net worth).
gigill gigill 9 years
I use both and it's not really working, but I swear I'll stick to my budget when I get my tax return back (soon hopefully!) *Fingers crossed*
jennjennnbubba jennjennnbubba 9 years
I am currently on the cash only plan b.c I have found I have a more difficult time spending frivolous cash that swiping the card
MelissaIsTheBest MelissaIsTheBest 9 years
Thanks Sundrops! You kind of cleared up a lot of the fuzz for me with the cash ideas. I may give it a shot, but that wouldn't be a change I could make over night too easily. Thanks!
GlowingMoon GlowingMoon 9 years
I use both to my advantage.
kelliegonzo kelliegonzo 9 years
cash only. it's the ONLY thing that's worked for me and my spendy-spendy habits. swiping that plastic is just too convenient!
beram1220 beram1220 9 years
I would rather use my debit card, I have a bad habit of shoving change in my purse (not my wallet) and losing money!
Brendelwoman Brendelwoman 9 years
Cash only. It has really helped reign in my spending. I was going way over every month, but I also wasn't checking the accounts because my husband handles the bills. After about 6 months of me being about $900 over every month, we devised the cash only system. If I was looking at credit card statements I'm sure it would be easy to track, etc. But I love the power of paying with cash. It just feels good.
sundrops sundrops 9 years
Hahaha, I read the first paragraph and was going to mention how we went cash only through Dave Ramsey's program. Here's my two cents - it USED to be hard for me to have cash because it would burn a hole in my pocket and I'd end up using my debit card any way. Now with cash only and no debit or credit or even checks to back it up, I watch it much much more carefully. Way more than with the debit card. I also use the envelope system occasionally to keep me on track when I feel like it's all been disappearing too quickly, but when I only have enough for food and gas and only spend it on food and gas I know where it's going any way.
Mintie Mintie 9 years
I have been cash only for the majority of my adult life... because I think credit is killing this country... and fueling this recession. So, even if I have nothing in savings, I'm flat. I owe no one! It's liberating and takes all that stress out of my life! I really wish more people would do this... I think it would help our country greatly.
MelissaIsTheBest MelissaIsTheBest 9 years
I can't carry cash without it burning a hole in my pocket. Debit card for me please :)
bsglrok132 bsglrok132 9 years
I already know how much I'm going to spend on rent, the bills (more or less), and food/house supplies, so I always have a certain amount that I can spend on going out or little everyday things. I use a mix of cash and credit/debit but I always know what's going on with my finances.
chicagojlo chicagojlo 9 years
I have that keep the change thing set up on my debit card so I use that, and then we have a credit card that gives us a 5% rebate on our gas and food purchases so we use that. In order to get the maximum rebates we use the cards, it also allows us to track our expenses in Quicken. I get paid on a weekly basis so it's easier to not overspend than when I got paid on a monthly basis, since even though it doesn't need to last as long, I have less to start with.
em113 em113 9 years
I use my credit card primarely and transfer money to my checking to pay it off once a month. My money earns a lot more interest sitting in a savings account than an envelope (or even a checking account connected to a debit). I've never understood people that go into credit card debt because they have no concept of their spending, it's really not that hard!
bengalspice bengalspice 9 years
i try to go as cashless as possible ... so i can see where my money is going on a bill and never have the problem of trying to remember where my last $20 went.
Jude-C Jude-C 9 years
I try to use cash much more than cards--like syako says, there's something about being able to see just how little cash a purchase will leave you with that can be a great deterrent to wasting :)
LadyAngel89 LadyAngel89 9 years
I don't use cash unless absolutely necessary. If I do, two weeks later when I'm wondering why I don't have any money... I can't remember what I split that 100 dollar bill to get and then what I got with the change. With my cards and checks I can use that awesome website Mint and keep track of my budget all month long! And I always pay myself (my savings) first and then bills.
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