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Gulp. Readers overwhelmingly supported my experiment to give up credit cards for one month and rely solely on cash. When I last checked, 86% of readers said go for it, 8% suggested an alternative, 4% said leave the plastic at home, and 2% had no opinion but were nice enough to vote.

Richard would never give up using credit cards because of the perks he earns.

We use our credit card for everything we can. Why? Airline miles. Last year we flew roundtrip to London, business class, for a total of $330 (taxes). However… we immediately deduct all purchases from our checking account (Quicken), sort of a pseudo-debit card so it’s like we pay cash. I pay the credit card bill online a day or two before the statement date so our credit report shows minimal card usage.

Ellie D.’s cash-only system has withstood the test of time:

Having a pay-as-you-go routine is definitely more economical than using cc’s for all your expenditures. I withdraw a certain amount of cash from my checking account each month, and ration it out on a weekly basis. When it’s gone, that’s it! However, I usually have something left at the end of each month, which means withdrawing less $$$ the next month. I do use cc’s on occasion, but pay them off monthly, and have never had a debit card.

Ashley pointed out three major disadvantages of using cash-only:

…a reason I have had problems making the switch is that I use mint.com and if I use cash it can’t track my purchases (I could but always forget to update and next thing I know I don’t remember if I spent $5 on groceries, $10 for a meal and $5 for parking or was it $10 on groceries and $5 on the other two. And finally, going only cash you can’t gain points that are available with some credit and debit cards and you can’t shop online where sometimes it is possible to find a better deal on products.

But Jenni says there is one major perk – staying on budget!

A dear friend uses this method All The Time, and she has 3 girls in various activities. Her budget is planned down to the penny, and when they are paid she gets out the cash she will need for the entire month. She bags the cash for their activities and labels them (i.e. “piano”, “ballet”, etc.), then does the same with her bills (“market”, “cleaners”, etc.). She even has a “miscellaneous” baggie for gifts and mishaps. She saves quite a bit of money every month, and she and her hubby are self-employed, so this helps in leaner times. Her spending is never out of control! LOVE her organization.

Tamara is going through a similar process:

I am in the process of transitioning to all cash. I think it will make me think twice about my purchases, and I am going to split up my money into jars to better track where my money is going using Gail’s system (http://gailvazoxlade.com/blog/).

All of this discussion makes me want to take a closer look at the perks I am earning using my credit cards. Which is greater? The credit card rewards I am earning or the money I am saving (as many readers say I will on a cash-only diet) by leaving the plastic behind? I won’t know the answer to this question until the end of the experiment, which begins April 1.

In the next few days I’ll think about how to deal with online purchases that require a credit card and what I’ll do about bills that I pay on my credit card. What other guidelines should I set before the cash-only experiment begins April 1?

Tagged: cash only, credit, credit card, Credit cards, credit moratorium on Friday, March 26, 2010 · 3 Comments »