Using cash or credit? Which do you think is best?
When you use cash, a part of your brain registers that action as a loss. It’s money coming out of your wallet or purse. But when you tap and go, with your debit or credit card, our brain just tunes out. We spend more, tip more and mentally check out.
But it’s hard to keep track of cash. Consider using it for some small purchases that you want to pay attention to or eliminate. Like eating out or trips for an afternoon soda.
And it’s a good idea for you and your family to choose a week every three months to only pay with cash. It provides greater tangibility and connects you to your spending. Just make sure to take enough out of your bank’s ATM so you aren’t charged a bunch of extra fees.
For bigger purchases, stick with your credit card, like booking a flight, buying an appliance, furniture or renting a cottage. You have fraud protection and lots of other safety features that you don’t have paying with cash, your debit card, an e-transfer or wiring money. For example, if you’re paying a retailer that you’re not sure if they're legit, either in person or online, you have a dispute mechanism with VISA and MasterCard that you wouldn’t if you paid cash or e-transferred the money.
To discover more money traps and how to correct them, check out my new book, Talk Money to Me: Save Well, Spend Some, and Feel Good About Your Money, in stores December 17th and available at Amazon and Chapters for pre-order now.
As the Consumer Advocate for FP Canada, I know that financial literacy is paramount to your well-being. Equally important to your long-term success is working with a qualified professional. To find a CERTIFIED FINANCIAL PLANNER® professional in your area that will help guide you on all matters of money, check out this Find Your Planner tool.
FP Canada is a national professional body working in the public interest (formerly known as the Financial Planning Standards Council). FP Canada is dedicated to fostering better financial health for Canadians by certifying professional financial planners and leading the advancement of professional financial planning in Canada.
For more on financial planning and how to get started, watch What is a financial planner? and What is a financial plan?