Cash Is King

Our Credit counselors share 10 times when using cash works in your favor

Using a credit card is convenient and easy. You earn frequent-flyer miles, reward points, even cash back. Seniors who survived the Depression still depend on cash, but the younger generation lives off plastic. Might there be times when using cash rather than credit makes sense?

The professionals at our consumer credit counseling solutions (CCCS) agency believe so. Why do they suggest that many of their clients shift to cash-based spending? The following are some situations when consumers will benefit by using cash.

1. You want to follow a budget but haven’t been successful.
   After creating a monthly household budget, you can label envelopes for each variable spending category. (Don’t include expenses you pay online or by check—mortgage, utilities, phone, etc.) The goal is to make up about six envelopes for things like car repairs, entertainment, food, gas, incidentals, and dry cleaning.

   At the beginning of each month and fill your envelopes with your budgeted amounts. Record your running balances on the outside of the envelopes. Once you’re out of money, don’t allow yourself to spend anymore on that category. As long as you follow it, this failsafe system will prevent you from spending beyond your budget.

2. Your spending is out of control.
   Charging disconnects you from your money. Imagine dropping $300 cash on a cell phone. You’ll be much more conscious of your spending when you withdraw so much cash from your checking account and hand it over to the salesperson compared to handing him or her your credit card.

   Since you can’t spend what you don’t have, using cash is a wonderful tool to help compulsive over-spenders stay in control.

3. You’ll get a cash discount.
   Some smaller businesses, like auto mechanics, gas stations, and carpet cleaners offer lower prices to customers who pay with cash. Whenever they make credit card sales, retailers must pay fees to the creditors. If they can avoid those fees, they can pass along a portion of the savings.

4. Your identity is at risk or has been stolen.
   If you are concerned about having your identity stolen, using cash will help prevent identity thieves from tracking expenditures back to you.

   Likewise, if you’re identity has been stolen, switching to cash for a short time, will allow you to straighten out your issues without accumulating more charges.

5. You’re getting hit with over-limit and late fees.
   These extra credit card fees add up fast. According to CardTrak.com, as of December 31, 2008, the average late payment fee was $35.36 and average over-limit fee, $35.91. By only using cash, you won’t risk facing a big bill and finance charges when your statement arrives.

6. You carry a balance.
   Even without accruing unnecessary fees, simply using revolving credit will cost you. Using cash prevents you from having to pay the average 13.5% interest on your purchases.

7. You want to get out of credit card debt.
   The first step in paying down your debt is to stop digging deeper. Credit counseling services offering debt management programs often require that clients cease using their cards during the program. Doing so allows each payment to cover more of the principal.

8. You want to teach your kids the value of money.
   Until your children make their own spending decisions, they won’t realize that we can’t have everything we want. Teaching them to make wise purchasing decisions now will help them in the future.

   A child that pines for a Barbie and a watch, but can’t afford both will have to chose one or buy a similar, no-name doll and watch.

9. You want to maximize your spending power.
   With limited cash, you will value the money you have and want to stretch it as far as possible. Comparison shopping, researching coupons, waiting for sales, and cooking larger meals will help you make the most of your money. ClearPoint offers many suggestions for everyday saving.

10. You’re feeling creative.
    If you decide you want something you didn’t plan for, you may need to sell some items online or host a yard sale. Participating in at-home activities—like reading books or playing with the kids or going to no-cost family-friendly places like a park or free museum will help you stick to your budget.

For assistance managing your credit card debt or creating a household budget, contact the debt management specialists at our consumer credit counseling services (CCCS) agency. Call 888.656.CCCS for an appointment or start your credit counseling session online.