Could spending cash save you money?

Could spending cash save you money?

Last updated: 19 July 2018

Now that sounds counterintuitive. How on earth could spending lead to saving?

Well, it’s about the how and with what rather than the actual spending here.

And the magic word? Cash.


There was a time when cash ruled everything around us but nowadays it’s all about tapping and going, Apple Pay, Afterpay and others, often powered by credit cards.

Where money used to be about actual physical paper and coins that you held and passed to other people for things, it’s now numbers on a screen or something tallied up after purchases. And often only when the bill comes.

Research has shown you end up spending more with credit cards than you do with cash. But why? In many cases, new payment technology simply makes it easier and quicker to pay!

So how does cash help?


Physically handing over money

As we just covered, cash feels more real. The act of handing it over is more visceral and a lot less easy than a simple swipe or tap. Doing so could just make you think twice about whether you really need something.


You can set a budget that’s easier to keep

People going on a cash-only diet often do so in conjunction with setting a specific budget or cash allowance. With this approach, you work out the amount up front that you are allowed to spend each week, and then you have to manage your way through the week. Want something big? Then you’ll have to save up by underspending for a few weeks and get some of that good delayed gratification feeling when you finally make that purchase.


No interest

Sounds obvious but when you’ve paid for something in cash, right there and then, you haven’t borrowed money for it. So, no interest. You don’t have to pay it off at the end of the month and there’s no chance of missing that payment and then accruing interest over to the following month. Credit card debt is a massive challenge in Australia and if you’re using cash then you might just avoid it.


Sometimes it is still more convenient

Now using cash can feel a bit old school and sure, you would actually need to carry it around but there are still many cases where cash is still more convenient. There’s the obvious example of cash-only businesses like local market stalls and where you’re only making a small transaction.

Then there’s also outages to banks and card providers leaving people stranded in the supermarket or petrol station.


But what do you miss out on?

The downsides of using cash? Well, we’ve already covered having to carry that wallet or purse full of money and that’s especially a challenge if you are making a large purchase.

You won’t get the rewards points that you can earn through certain credit cards and you also don’t get the built-in purchase protection that can come with cards.

Then finally, it can be harder to keep track of the purchases you do make as there isn’t the automatic transaction history you get from a statement, so you can see where your money went. You would need to keep receipts or a tally as you go.


Ultimately, it’s up to you as the consumer to decide what works best for you but this can be a strategy to try if you’re finding it hard to keep a cap on credit card spending. You can also check out some of our other articles in our Learning Hub for more tips, tricks and approaches to managing your money.