People who use credit cards spend an average of 12% - 18% more!

[mefordis]

I just heard this statistic. I always pay my credit cards off at the end of the month but I KNOW I spend more using plastic.

Anyone stop using credit cards (voluntarily) and use the cash envelope system or debit card only?

I am looking to cut my spending drastically.

 

[Branabb]

We have been on the envelope system since January and it is quite astonishing how much of an impact it makes on spending. We weren't exactly loose with our money before, but sometimes receipts don't get recorded or what not with CC spending.

I have a 5% cash back AMEX that I used for almost everything and paid off each month, but we always seemed to spend more than we budgeted. Now we are on the other side of the coin; we spend less than we budget for. It's great.

On a side note, you don't necessarily have to use real cash envelopes for everything. There are some free and cheap virtual envelope systems that really work well for people. Mvelopes is one example (not free). I don't use them, but they may work for you.

What I do now is manage my budget with YNAB (You Need a Budget) and it has eliminated most of my envelopes. I only have envelopes for groceries and gas now. I live in an apartment complex, and I did not like having so much cash in the apartment.

 

[GOOFY D]

I just heard this statistic. I always pay my credit cards off at the end of the month but I KNOW I spend more using plastic.

Anyone stop using credit cards (voluntarily) and use the cash envelope system or debit card only?

I am looking to cut my spending drastically.

I am a bit skeptical at those numbers myself. If you pay off monthly, what good would using the debit card do (other than taking away a month of float and the minimal interest earned in that month in your bank account)?

 

[Branabb]

That stat isn't anything new. It used to be over 20%. What it is referring to is spending habits. In other words, the average consumer spends more than they would if using cash, check, or debit card (i.e. coming right from their pocket immediately). The majority of consumers don't pay off CC debt monthly, and never intend to from the beginning.

For those of us who track spending and pay off monthly, the number is more like 3-5% as I recall. Again this is in reference to the average consumer. So it doesn't necessarily apply to me or you.

 

[bettymae1121]

I'm sure that's true of some, but I budget what I can afford (month by month) and stick to that budget. I'd spend the same with cash or credit, because I have a budget I'm sticking to.

But if switching to cash/envelope system helps you cut your spending, by all means do so. Good luck!

 

[JamesMom]

This is why casinos use chips instead of cash for their games. Somehow a piece of plastic doesn't equate to cold hard cash in our minds so we spend more than would have if we used the green stuff. Same principle applies to the swiping of a card - even a debit card.

 

[Aulika]

When you have cash, you are limited to the amount you have in hand. If you want more than that you need to go home and come back again. It helps reducing impulse spending for big stuff

 

[Shelly888]

I personally find it much harder to part with cash than to use my debit card. We don't use credit cards, and have a very small balance on one of them(we have several, we just don't use them). I had thought about trying it myself and seeing how it goes. I would love to save even 5% a year, that would be sweet!!!

 

[Vivianne]

We use a credit card and pay in full on a monthly basis.

The minute this is not advantageous to us...We're out!

And, I do realize this is in our future.

 

[robsmom]

I do think there is something pyschological to using cash that makes people think a little more. I think the bigger impact to this statistic is that being on a budget and tracking spending is what really makes people spend less. Many people who go on a budget move to the cash method and so I think this impacts the statistics. I have begun really tracking our spending but still use a credit card. I am a bit suprised at what we spend in a few categories and i think just looking at the totals will change a few habits.

 

[crashbb]

That stat isn't anything new. It used to be over 20%. What it is referring to is spending habits. In other words, the average consumer spends more than they would if using cash, check, or debit card (i.e. coming right from their pocket immediately). The majority of consumers don't pay off CC debt monthly, and never intend to from the beginning.

For those of us who track spending and pay off monthly, the number is more like 3-5% as I recall. Again this is in reference to the average consumer. So it doesn't necessarily apply to me or you.

The thing is, it doesn't actually say that (the bit I bolded).

People are not randomly distributed between credit card users and non credit card users. Therefore, differences in spending habits between the two groups cannot be put solely to the use of the credit card. There are likely factors that influence choosing to get a credit card that also tend to occur in people who spend more.

Since you cannot do a randomized control trial, it is difficult to actually say what difference a credit card makes in an individual. Even looking at the same people, when they had credit cards and after giving them up doesn't really answer the question. Often (not always) something happened to the person to cause them to give up credit cards. Again, this event would likely have an independent effect on spending habits.

All this is not to say that credit cards do not cause people to spend more, just that the stats (as stated) do not give percentages of the difference that an individual would spend with and without a credit card.

 

[MrsPete]

That stat isn't anything new. It used to be over 20%. What it is referring to is spending habits. In other words, the average consumer spends more than they would if using cash, check, or debit card (i.e. coming right from their pocket immediately). The majority of consumers don't pay off CC debt monthly, and never intend to from the beginning.

Exactly. The AVERAGE shopper (though you and I may or may not be avereage in this regard) who plans to pay with a credit card is more likely to toss a few extra items into the cart because it doesn't "feel like" real money. So they buy steaks even though they'd planned on hamburgers, they choose a scarf that they probably wouldn't have bought otherwise, they let the kids get a candy bar at the register. However, this is -- as you said -- a spending habit, not the fault of the credit card.

I use my credit card for EVERYTHING, but I really don't buy things I wouldn't have bought if I were paying cash. I'm very disiplined with my spending. The one place I DO pick up "extras" is at the grocery store, but I don't consider that a bad choice. Say I see chicken on sale this week. I'll get 3-4 packages for the freezer. Yes, I might spend more than I'd planned today, but chicken is something I would've bought again next week anyway -- and it makes sense to buy it when it's on sale. It'll lower my bill next week, and I'll come out ahead in the long run, even if not today. That's why I have about 10 boxes of Stove Top stuffing; it's something my family eats regularly, and it was .40 before Thanksgiving.

Used wisely, a credit card can be a good tool. Used poorly, it can cost you big money. I suspect most people use them poorly; otherwise, why would so many companies be so anxious to get their card into your wallet?

This is why casinos use chips instead of cash for their games. Somehow a piece of plastic doesn't equate to cold hard cash in our minds so we spend more than would have if we used the green stuff. Same principle applies to the swiping of a card - even a debit card.

Also the reason cruise ships don't accept cash money onboard. Everything must be charged to your ship account.

 

[momto2girls]

I think there is something to this. I likely spend more than I would if I were using cash or a debit card. We use credit cards for everything and pay it off every month (haven't had a balance since 1993), but I do think that I would be more frugal if I used cash. I'm not planning to change anything because we can afford it, and I don't have any reason to change my habits at this point. However, if I ever get to the point that I do need to watch my spending, I will definitely remember this and switch to cash or debit or at least set up a budget. to follow. I agree with Mrs. Pete in that I believe that if I needed to, I could be just as disciplined with a credit card as cash.

 

[Tinkerbellie16]

Be wary of any statistic! It wasn't a few months ago that they were saying people who used cash spent more. And are they saying dollars or percentage?? Also, if you compare one person with a credit card and another person without - there could be good reasons the one with cash spends less. Like they have less income and maybe can't get credit in the first place.

It's like saying adding lentils to your diet will make you skinny. These are TOOLS to help, and they do not guarantee results. The only way you are going to spend less...is if you buy less whether using cash or credit. If you are one of those people that has no willpower with your credit cards, then using cash may help you curb your spending.

For me, I actually find that having cash makes me feel like I have money and I can spend it. So I prefer to put everything on credit cards. I utilize the bonuses I get from those credit cards, don't pay annual fees, and pay off my balance every month. I find when I use a credit card, I am less prone to get less expensive items (that add up when you get them a lot) like a coffee or a fast food lunch. I feel that using a credit card for that small amount is silly and since I don't have cash, I just don't buy it. So for me, credit cards help curb my spending.

Use all the tools you can to help YOU with your budget. Everyone is different! Good luck

 

[Marionnette]

Be wary of any statistic! It wasn't a few months ago that they were saying people who used cash spent more.

Where did you read this? I've been aware of the theory that credit card users spend more on average but I have never seen anything that says people using cash spend more.

I know that when I head out shopping with a certain amount of cash in my wallet, I also go with the knowledge that I can always put it on one of my credit cards if I happen to go over. That's been my MO for years. I don't use debit cards except at European ATMs. If I don't have enough cash on hand, I pull out the plastic and think about the points I'm racking up.