Cash Amnesia(gsb.stanford.edu)
gsb.stanford.edu
Cash Amnesia
https://www.gsb.stanford.edu/insights/indulging-guilty-pleasure-dont-put-it-card
165 comments
I'll say this, spending cash is harder in the moment. There's a real visceral feeling of loss when handing over actual cash vs card.
However, when it comes to tracking long term? Cash always seemed to just ...evaporate, out of my wallet where as I can look back and see my credit card purchases and go 'why did I spend that much on that?!'
In my experience, there are two types of people when it comes to money. There are spenders, who could usually stand to cut back, and savers, who could stand to loosen up. I'm definitely in the 'could stand to loosen up' camp. I even went so far a set aside a 'fun money' budget but it mostly goes unspent because my frugality has no chill...
However, when it comes to tracking long term? Cash always seemed to just ...evaporate, out of my wallet where as I can look back and see my credit card purchases and go 'why did I spend that much on that?!'
In my experience, there are two types of people when it comes to money. There are spenders, who could usually stand to cut back, and savers, who could stand to loosen up. I'm definitely in the 'could stand to loosen up' camp. I even went so far a set aside a 'fun money' budget but it mostly goes unspent because my frugality has no chill...
Conscious spending could help out both camps. Spenders tend to spend too much on things that don't matter to them, and savers spend too little on things that matter to them.
The problem is conscious spending requires more initial setup that a lot of people don't want to do. They don't want to look at their bills and tally up the monthly total, automating that to be paid first, and then looking at their savings/investing/donation goals and taxes/limitations and dedicating certain amounts next per month. That's all too much initial work for them, but once you're on the other side it's glorious. I see how much is in my spending account, and spend it freely if whatever it is matters to me more than just the thrill of spending.
So many are just not honest with themselves and what actually matters to them. They have a huge house not because it makes them happy but because it's what they feel pressured to have. But this is a trick, remaining in this state winds up burning you out so much faster because you are not nourishing what your soul wants. What they actually would rather be doing is travelling the world, and yet they only put aside 1% monthly to a travel fund, and 70% goes to a home they don't care about. They wind up never travelling because they distract themselves with irrelevant things, get burned out at their job, feel like moving cities, etc. It happens all the time!
To make this clear, this isn't about downsizing. If a big home does matter to you, that should obviously take a much larger portion of your monthly bills. But you can't make these decisions without going through that above work honestly.
The problem is conscious spending requires more initial setup that a lot of people don't want to do. They don't want to look at their bills and tally up the monthly total, automating that to be paid first, and then looking at their savings/investing/donation goals and taxes/limitations and dedicating certain amounts next per month. That's all too much initial work for them, but once you're on the other side it's glorious. I see how much is in my spending account, and spend it freely if whatever it is matters to me more than just the thrill of spending.
So many are just not honest with themselves and what actually matters to them. They have a huge house not because it makes them happy but because it's what they feel pressured to have. But this is a trick, remaining in this state winds up burning you out so much faster because you are not nourishing what your soul wants. What they actually would rather be doing is travelling the world, and yet they only put aside 1% monthly to a travel fund, and 70% goes to a home they don't care about. They wind up never travelling because they distract themselves with irrelevant things, get burned out at their job, feel like moving cities, etc. It happens all the time!
To make this clear, this isn't about downsizing. If a big home does matter to you, that should obviously take a much larger portion of your monthly bills. But you can't make these decisions without going through that above work honestly.
This is it exactly - if I spend $2k on an item, I'm going to remember that if it was cash or card, but only card tells me "you spend $2k last month at Walmart".
so the benefit is that paying by card makes tracking your expenses easier.
but the downside is that it also makes makes profiling easier for anyone who can get access to your bank statements which not only includes the bank but more critically also walmart or any other place where you shop regularly.
i rather track my spending manually. there are tools that can help with that too, like receipt scanners. granted, it's more work, so one needs to weigh the options. for me though, supermarkets are the last place that i want to be able to track my shopping because most of it happens there.
but the downside is that it also makes makes profiling easier for anyone who can get access to your bank statements which not only includes the bank but more critically also walmart or any other place where you shop regularly.
i rather track my spending manually. there are tools that can help with that too, like receipt scanners. granted, it's more work, so one needs to weigh the options. for me though, supermarkets are the last place that i want to be able to track my shopping because most of it happens there.
The challenge of course, is it's easy to lose or misplace receipts, etc.
Some of us have issues with (essentially) self sabotage that way. Some of us have also had issues with people in our lives not so accidentally sabotaging (or stealing) things that way. Come to think of it, I don't know any long term married couples that didn't have one of the two do SOMETHING like that at some point.
The nice thing (or terrible, if you're worried about privacy) about credit cards is you can go back as long as you need and figure out what money went where, from whom.
When cash is gone, it's gone. If someone has to provide receipts/prove expenses to get more, that can be managed. If someone can just pull it out, less so.
Pros and cons either way, of course.
Some of us have issues with (essentially) self sabotage that way. Some of us have also had issues with people in our lives not so accidentally sabotaging (or stealing) things that way. Come to think of it, I don't know any long term married couples that didn't have one of the two do SOMETHING like that at some point.
The nice thing (or terrible, if you're worried about privacy) about credit cards is you can go back as long as you need and figure out what money went where, from whom.
When cash is gone, it's gone. If someone has to provide receipts/prove expenses to get more, that can be managed. If someone can just pull it out, less so.
Pros and cons either way, of course.
well, it depends on how you look at it, no matter how much you deceive yourself (or your partner), in the end it only matters if you spend above or below your means. if you spent to much it doesn't really matter where the money went in the past, you need to fix the spending in the future. finding who or what to blame is only half the problem. either you both agree to manage finances or you don't. if you can, put some money aside in a locked savings account that noone can touch. (i had a special savings account that would only generate interest as long as i didn't touch it, but kept paying into it regularly). that's a good way to prevent money from disappearing.
Ah, sweet summer child. The problem cases almost always agree to manage finances together and be reasonable!
The money still disappears.
No records just makes it easier to be gaslit, or blamed by the actual perpetrator in a court of law.
At least when it’s recorded by a third party it’s harder to bullshit about. Two separate friends of mine had their spouses (when under stress) nearly bankrupt both of them using credit cards they signed up for without their knowledge.
They found them on their credit reports due to something unrelated, and at least was able to track down what had happened. Both wives had been shredding the statements. One had racked up $80k, another $70k.
Personally, I had a large and very vague amount of cash disappear (approx $10k) through likely fake expenses just before getting hit with a bunch of false accusations - when I tried to get away from an abusive ex. Considering I’d been trying to get her to sit down with me and discuss household finances for awhile and how much gaslighting and confusion she was making on the topic (and I really wish I was projecting on this), it was probably a whole lot more. But very difficult to discern.
The legal chaos she created shortly afterwards meant I never could get an answer what happened. And frankly was a drop in the bucket compared to the other damage she did.
Could have been worse - I have an acquaintance who’s husband got a HELOC on their house and then bailed with all the money before she found out. 5+ years of drama.
The money still disappears.
No records just makes it easier to be gaslit, or blamed by the actual perpetrator in a court of law.
At least when it’s recorded by a third party it’s harder to bullshit about. Two separate friends of mine had their spouses (when under stress) nearly bankrupt both of them using credit cards they signed up for without their knowledge.
They found them on their credit reports due to something unrelated, and at least was able to track down what had happened. Both wives had been shredding the statements. One had racked up $80k, another $70k.
Personally, I had a large and very vague amount of cash disappear (approx $10k) through likely fake expenses just before getting hit with a bunch of false accusations - when I tried to get away from an abusive ex. Considering I’d been trying to get her to sit down with me and discuss household finances for awhile and how much gaslighting and confusion she was making on the topic (and I really wish I was projecting on this), it was probably a whole lot more. But very difficult to discern.
The legal chaos she created shortly afterwards meant I never could get an answer what happened. And frankly was a drop in the bucket compared to the other damage she did.
Could have been worse - I have an acquaintance who’s husband got a HELOC on their house and then bailed with all the money before she found out. 5+ years of drama.
sure, but those are cases of outright deception, where, with a bit more energy by the deceiver, tracking expenses through the bank may not have helped. and i am sorry for what you had to go through. your experience makes me think of a discussion just a few days ago: https://news.ycombinator.com/item?id=36767454
i don't know how one can protect against that. the only thing i can think of is to prevent anyone in the family from having a high credit limit. or avoid credit cards altogether. but that's much easier here where credit cards are less common.
i don't know how one can protect against that. the only thing i can think of is to prevent anyone in the family from having a high credit limit. or avoid credit cards altogether. but that's much easier here where credit cards are less common.
Unfortunately, any of the protective actions one could take would be legitimately abusive and controlling against someone who ISN'T one of those messed up people. So if someone feels like they need it, either they really shouldn't be getting married to that person (but are in denial), OR they're probably a legit abusive spouse. And really shouldn't be marrying anyone.
And in most places, if you're married, legally you can't stop the partner from entering the 'community' into debt like that, or encumbering community property. So to your point, yeah it couldn't be stopped even with bank tracking. But it is harder to do that way.
The most you could do is make the responsible party take on the debt entirely on their own later when the divorce settles, but anyone likely to do this kind of BS will make that a multi-year living hell. It's rarely worth the attempt, as legal fees will often far outweigh any money recovered.
There is a reason that 99% of family law attorneys will tell men to just not get married. For guys, 99% of them will also tell them to just not let women live with them (due to various ways THAT is often used against men), etc. Pre-nups are important and can reduce the damage, but are not bullet proof.
For women, the system does generally favor them - but they can and will be drug through hell if they end up with a problem spouse too. And can end up with life altering debt (problem gamblers being a common pattern), abusive partners they can't get rid of, etc. They're more likely to be murdered in a bad situation too, by a long shot.
If someone has an actual reasonable spouse (and is actually reasonable) but want to get divorced, then it's actually not that big a deal and it can be resolved relatively quickly. And that does happen. But for the most part, most of those people don't end up needing the system anyway - as both people are actually reasonable.
And people who aren't from backgrounds that result in them being blind to signs of real problem behaviors usually see and avoid the really dangerous people anyway before they can get their hooks in.
The best prevention frankly is having two loving, stable parents who raised someone well, to have not been abused as a child, and to be nurtured, etc.. So that someone knows what 'good' feels like, has reasonable role models that cover the common gender setups and models healthy behaviors, etc. It's far from foolproof though, and those situations are actually quite rare. What is common is setups that LOOK like that, but are actually deeply screwed up when you're inside - but in ways the participants can't or won't see.
Folks with NPD, ASPD, and other Cluster B personalities in particular are powerfully manipulative and destructive, and can pretend to be really amazing and wonderful until you're already 'stuck'. Co-dependent behavior is rampant. Etc.
And in most places, if you're married, legally you can't stop the partner from entering the 'community' into debt like that, or encumbering community property. So to your point, yeah it couldn't be stopped even with bank tracking. But it is harder to do that way.
The most you could do is make the responsible party take on the debt entirely on their own later when the divorce settles, but anyone likely to do this kind of BS will make that a multi-year living hell. It's rarely worth the attempt, as legal fees will often far outweigh any money recovered.
There is a reason that 99% of family law attorneys will tell men to just not get married. For guys, 99% of them will also tell them to just not let women live with them (due to various ways THAT is often used against men), etc. Pre-nups are important and can reduce the damage, but are not bullet proof.
For women, the system does generally favor them - but they can and will be drug through hell if they end up with a problem spouse too. And can end up with life altering debt (problem gamblers being a common pattern), abusive partners they can't get rid of, etc. They're more likely to be murdered in a bad situation too, by a long shot.
If someone has an actual reasonable spouse (and is actually reasonable) but want to get divorced, then it's actually not that big a deal and it can be resolved relatively quickly. And that does happen. But for the most part, most of those people don't end up needing the system anyway - as both people are actually reasonable.
And people who aren't from backgrounds that result in them being blind to signs of real problem behaviors usually see and avoid the really dangerous people anyway before they can get their hooks in.
The best prevention frankly is having two loving, stable parents who raised someone well, to have not been abused as a child, and to be nurtured, etc.. So that someone knows what 'good' feels like, has reasonable role models that cover the common gender setups and models healthy behaviors, etc. It's far from foolproof though, and those situations are actually quite rare. What is common is setups that LOOK like that, but are actually deeply screwed up when you're inside - but in ways the participants can't or won't see.
Folks with NPD, ASPD, and other Cluster B personalities in particular are powerfully manipulative and destructive, and can pretend to be really amazing and wonderful until you're already 'stuck'. Co-dependent behavior is rampant. Etc.
We can't be that far from the facial recognition in stores/at registers building that same profile for cash customers :(
It’s still socially acceptable to wear a face mask in public
not everywhere. at least some european countries and aparently some places in the US too ban the wearing of facemasks, some only on large public assemblies and some ban it in general. covid of course made mockery of those laws.
true, but laws making that illegal are also being considered at least in some places, which means awareness of the dangers does exist
I definitely feel the "frugality has no chill" attitude. I describe it, charitably, as being an extremely content person. The downside is that there are plenty of things that I could point at that would make my life somewhat better ( replacing my 30 year old Honda with a Tesla or something would definitely save me time on maintenance, for example). The upside is that when something does pass my high bar of "willing to spend money on it", I rarely have to worry about being able to afford it.
This is literally me. I am a spendthrift with cash, even though most of my purchases would be cheap consumables and perishables - but still I hyper-analyze deciding whether to buy or not.
On the other hand, when I pay by card, I don't analyze the buying decision much, even though it's likely a big purchase.
Lose-lose either way. I had to put a personal limit on the amount of cash and accessible money on cards I hold on my person because of this.
On the other hand, when I pay by card, I don't analyze the buying decision much, even though it's likely a big purchase.
Lose-lose either way. I had to put a personal limit on the amount of cash and accessible money on cards I hold on my person because of this.
I'm from Norway, where cash is rare these days. But I feel similar, it's a lot more obvious how much you pay when you need to count bills and hand them over.
As a compromise I only keep a small amount of money on my debit card. That way I have to keep topping it up, so I get a sense of my spending that way.
As a compromise I only keep a small amount of money on my debit card. That way I have to keep topping it up, so I get a sense of my spending that way.
I keep two accounts for my payroll deposits... one which is my day to day usage (fuel, food, entertainment, etc) and the other where bills get paid from. I also keep my large bills and credit cards not autopay. So I have to actually go in at least once a month to pay the mortgage, car payments, and pay off CC. It helps for awareness, but not actively tracking sometimes makes it surprising how much gets spent in a month.
Also from Norway. Haven't paid cash in ~10 years. I have no idea how the new currency looks like. I lost my wallet at some point, and just never replaced it. I pay with my Garmin watch (or phone once in a while). My driver's license is an app.
you have a "high trust" and "wealthy" country -- good for you. Not everyone lives like that.
Here in the USA, tracking people for profit has exploded, and the benefit is not for the person being tracked.
I advocate cash for old reasons, and new reasons. Use high-tech payments if you like -- do not think they can be mandatory here in the USA.
Here in the USA, tracking people for profit has exploded, and the benefit is not for the person being tracked.
I advocate cash for old reasons, and new reasons. Use high-tech payments if you like -- do not think they can be mandatory here in the USA.
> do not think they can be mandatory here in the USA.
I sure hope not, but there's been quite a lot of things that have been on the "could never happen here" list that have in fact happened. I have no faith that eliminating cash is inconceivable.
I sure hope not, but there's been quite a lot of things that have been on the "could never happen here" list that have in fact happened. I have no faith that eliminating cash is inconceivable.
The point is that once your memory fades, that's it. Unless you took a receipt, kept it, don't lose it, AND have a reason to look at it, the purchase will essentially have never happened. If it's on a card it's on that statement forever.
That was my take as well... when I was younger and paid for nearly everything in cash... I'd literally see the amount in my wallet go down, and have to think twice on everything. I was so much more aware of the fuel I was buying, how much I would or wouldn't spend eating out, grocery shopping etc. Now it feels like sticker shock each month when I pay everything off... "how did I spend that much." I think the article makes a lot of conclusions that my own experience would indicate the opposite.
I wonder if part of this is a function of time passing / getting older rather than purely cash vs not.
I can't speak for all, but I came from a lower/lower-middle income family... when I was in my later teens, I generally didn't hold a lot of money to trust in debit purchases not overdrawing. Didn't even have a CC until I was nearly 30yo.
Yes.
Some experiences need friction. For example I do not automate any bills. Each of them are paid manually (with a few exceptions like subscription services)
I want to see, feel, know and understand what is happening behind the curtain when it comes to my hard earned assets.
I want to see, feel, know and understand what is happening behind the curtain when it comes to my hard earned assets.
Ehh...
Ok so right at the beginning of the Ukraine War I went and pulled €9000 out of the bank (don't have to declare under €10k at Customs) and put it in an envelope labeled "SHTF” and stuck it on the pinboard. The envelope recently became empty. I can't exactly tell you what we spent it on. Not "guilty pleasures," of that I'm reasonably sure, but probably some shit we could have lived without except hey there's this mad crazy money envelope, sure why not grab a couple hundo and splurge...
Out of curiosity, how old are you? I’m in my thirties and think the same.
I don't think it's tied that much to age, but rather local culture. For example this mindset is prevalent in Germany and Switzerland to the point where many locals look at you weird when you ask them why they prefer cash. (There are other historical reasons here too, but that doesn't take away from the main point.)
> when you ask them why they prefer cash
Would they also say they spend cash more loosely than card? That's the phenomenon being described, not absolute preference.
Would they also say they spend cash more loosely than card? That's the phenomenon being described, not absolute preference.
In the conversations I've had with people from Germany and Switzerland it's the other way around, with cash they're more aware and thus more frugal with their spending.
Right. That’s what the article says. OP described an opposite reaction which I share. The hypothesis of local culture doesn’t work because the cultures you named align with the paper, which seems to be the default tendency worldwide.
As part of teaching our kids about money, I insisted on not only using physical currency for items the kids decided to purchase with "their own money", but on ringing them up in a separate transaction and having my kid actually hand over the currency and receive the change and the item. (This doesn't work for online purchasing, of course, but anything in store, we'd do this way.)
> “Certain products are more guilt-inducing because they feel more like impulsive purchases, like a foam hand for the sports game,” Huang says. “Some are more rational purchases, such as books or stationery products for class.” Sure enough, they found that customers were more likely to pay in cash for harder-to-justify items like stuffed plush mascots and Christmas ornaments.
Or perhaps the group of people buying harder-to-justify items tend to be people who don't bother to learn the perqs of credit cards or don't have enough credit, so they'd use cash regardless of what they're purchasing, but they purchase junk, so they end up painting this author's picture either way.
Or perhaps the group of people buying harder-to-justify items tend to be people who don't bother to learn the perqs of credit cards or don't have enough credit, so they'd use cash regardless of what they're purchasing, but they purchase junk, so they end up painting this author's picture either way.
When I first moved to North America, the idea that a credit card company was allowed to give people cash back, offer insurance, etc. for using their cards seemed like some bizarroworld "how is this legal" concept. Having lived here for decades, it still is. It's like an alcohol shop rewarding its most alcoholic customers by giving them free booze.
And then if you sign up for a new card, or you cancel a card, some random private company decides to rate you and then banks look at that private company's data to decide whether or not you're a good little consumer worthy of their business?
Credit cards might have been a reasonable idea, but give me direct, free, immediate digital banking and debit cards any day of the week please. The US went "what if we took the worst way to do banking, and made that the default?" and that's why banks don't even handle affordable EFTs themselves. It's the creditcard companies again.
And then if you sign up for a new card, or you cancel a card, some random private company decides to rate you and then banks look at that private company's data to decide whether or not you're a good little consumer worthy of their business?
Credit cards might have been a reasonable idea, but give me direct, free, immediate digital banking and debit cards any day of the week please. The US went "what if we took the worst way to do banking, and made that the default?" and that's why banks don't even handle affordable EFTs themselves. It's the creditcard companies again.
I straight use credit cards as insurance, especially against scams.
I specifically dont use a debit card at all and dont carry it. I only have it to pull money out and it stays locked in a safe at home.
CC's allow me to ensure things like Amazon sellers arent scamming you, or worse, random websites with awful return policies. With a CC merchant that have a motivation to work on your behalf (ie: to get you to pay them for the charges).
With a debit card that money is gone and its your responsibility to recoup it or convince your bank to credit you that money back..no thanks.
I specifically dont use a debit card at all and dont carry it. I only have it to pull money out and it stays locked in a safe at home.
CC's allow me to ensure things like Amazon sellers arent scamming you, or worse, random websites with awful return policies. With a CC merchant that have a motivation to work on your behalf (ie: to get you to pay them for the charges).
With a debit card that money is gone and its your responsibility to recoup it or convince your bank to credit you that money back..no thanks.
We all have different perceptions of risk, don't we? My approach is the opposite of yours - I carry my debit card everywhere, and use it for every non-cash purchase - because I am far more concerned about the everyday risk of getting into debt by spending more than I can afford than the relatively unlikely prospect of getting scammed.
I did have to recoup stolen money once, but this was quick and straightforward since I am a member of a credit union. Leaving my debit card at home would not have helped, since the thief proved to be my ex-girlfriend!
I did have to recoup stolen money once, but this was quick and straightforward since I am a member of a credit union. Leaving my debit card at home would not have helped, since the thief proved to be my ex-girlfriend!
We definitely do. And my intent wasnt to proselytize about it. More to just explain the reasoning.
I have had fraud due to things outside of my control that took hundreds of hours and months to recover from. Some being from family of all things. But an Ebay/Paypal EFT with a previous bank (Suntrust) causing recurring overdrafts and a LOT of effort to get it to stop caused a lot of the afformentioned structure.
We are both fairly stringent on spending, myself having had to crawl out of CC debt, so sticking to budget and keeping spending in check isnt so hard anymore. We definitely still have plenty of other safeguards as well.
For example any loan we "reverse engineer" to design it to a specific payment that sets a budget limit. And for things like cars, we keep that loan to no more than $300/month. And once the car is paid off we continue putting that 300/month into a savings account for repairs and/or down payment on the next vehicle when repairs start to exceed the value of the vehicle.
We also do the same for the kids college funds etc,.
I have had fraud due to things outside of my control that took hundreds of hours and months to recover from. Some being from family of all things. But an Ebay/Paypal EFT with a previous bank (Suntrust) causing recurring overdrafts and a LOT of effort to get it to stop caused a lot of the afformentioned structure.
We are both fairly stringent on spending, myself having had to crawl out of CC debt, so sticking to budget and keeping spending in check isnt so hard anymore. We definitely still have plenty of other safeguards as well.
For example any loan we "reverse engineer" to design it to a specific payment that sets a budget limit. And for things like cars, we keep that loan to no more than $300/month. And once the car is paid off we continue putting that 300/month into a savings account for repairs and/or down payment on the next vehicle when repairs start to exceed the value of the vehicle.
We also do the same for the kids college funds etc,.
The big difference between the risk profile of a credit card vs a debit card is that if I willingly put myself in debt by spending more than I can afford, that was an action I chose to take. If my card details get stolen and someone racks up a bunch of charges, I had little to no input in that action. At most, I was too trusting with my choice in vendors.
I'd rather control things within my control, e.g., my spending, than those outside my control, like thieves and scammers. So I use my credit card everywhere.
I'd rather control things within my control, e.g., my spending, than those outside my control, like thieves and scammers. So I use my credit card everywhere.
Yes, with a debit card in North America that is certainly true. Because banks are shit here.
Not really, because most banks have zero liability policies even though the law doesn't mandate it[1]. That said, the susceptibility to fraud is a fundamental problem with debit cards. When the card gets charged, it's your money that's taken out (or at least put on hold). On a credit card, it's the bank's money. That's an important difference, because even if you get reimbursed for it at the end, you're still without money during the time it takes for your bank to reimburse you. With a credit card you have a few weeks from when the statement is issued to pay.
[1] https://usa.visa.com/pay-with-visa/visa-chip-technology-cons...
[1] https://usa.visa.com/pay-with-visa/visa-chip-technology-cons...
Thats exactly why we are structured that way. Especially for our primary accounts.
Its also why we use 3 banks. So if for some reason 1 bank had some type of incident or the accounts do, we have 2 other options with cash reserves. Though that has not happened to OUR accounts, we have had incidents at our banks (they just didnt affect our account balances)
Its also why we use 3 banks. So if for some reason 1 bank had some type of incident or the accounts do, we have 2 other options with cash reserves. Though that has not happened to OUR accounts, we have had incidents at our banks (they just didnt affect our account balances)
> most banks have zero liability policies even though the law doesn't mandate it
how is that "not really"? That's "yeah, because"
how is that "not really"? That's "yeah, because"
Saying "banks are shit here because they have zero liability policies" isn't too sensical. Saying "banks are not really shit here because they have zero liability policies" makes decent sense.
banks are shit here because they are not required by law to have liability policies. Just because the laws aren't in place doesn't magically make the banks fine, it makes them shit, while being legally compliant.
(Under Danish laws...)
I do the opposite: my main debit card is in my wallet, and is used for almost all purchases. Once it's done, I'm holding the groceries and my money is spent — I don't think about it again.
The credit card is at home, and also in my password manager. I use it for the riskier purchases, primarily airline tickets from non-EU airlines and small European budget airlines, and expensive concert tickets.
I do the opposite: my main debit card is in my wallet, and is used for almost all purchases. Once it's done, I'm holding the groceries and my money is spent — I don't think about it again.
The credit card is at home, and also in my password manager. I use it for the riskier purchases, primarily airline tickets from non-EU airlines and small European budget airlines, and expensive concert tickets.
The problem here is the banks not being required to do at least as good a job as the credit card companies (who are often also banks). They punish people who prefer not to use credit.
I've lived in the USA my whole life, and I still think it's bizarre and ought to be illegal. It's basically a bribe.
The worst part is, as long as it is legal, it just makes sense use it - because most things are the same price either way, so it's essentially a small discount on everything.
So, I simultaneously use it regularly and hope it becomes illegal.
The worst part is, as long as it is legal, it just makes sense use it - because most things are the same price either way, so it's essentially a small discount on everything.
So, I simultaneously use it regularly and hope it becomes illegal.
I definitely favor using CC, and paying off if only for the 2-5% "cash back" program(s). If I pay cash, I'm effectively paying extra, same for debit. It kind of sucks, and definitely should be better managed. Also, if you let the debt accumulate on a CC (very easy to do), then the interest definitely comes out to more than the rewards in that case.
Oh, yeah, CC companies love it when people carry a balance and pay interest.
But they're still making money off of someone like me who pays the full balance off each month, because when they give me 2% back, they're charging the merchant 5% or more.
It's kind of a heads-they-win, tails-you-loose situation.
But they're still making money off of someone like me who pays the full balance off each month, because when they give me 2% back, they're charging the merchant 5% or more.
It's kind of a heads-they-win, tails-you-loose situation.
5% processing fees are predatory, and the only people that pay them are mom and pop shops that don't have leverage. Larger merchants are going to be closer to ~1.5%.
Well, I know I'm getting 5% back on Amazon purchases, so there's some there, there so to speak.
Without some other changes to the system, like direct consumer banking and fraud protection through the fed, making points illegal would just be a big windfall for credit card companies, as they would remain the most convenient way to pay for things, while being able to keep like 2% more of what they charge merchants.
This is already a completely solved problem in most of the world. They simply cap the fees card companies can collect from merchants by law.
That sounds unlikely to me to be "solved" rather than "a different local maximum". I'm very skeptical that any governments know the single perfect solution to the formula of the precise level of merchant fees that is the best possible solution.
If you cap fees, all that will happen is high risk businesses won't be able to accept cards and the processors will find ways to nickel and dime (+pos fee, paper billing fee, customer service fee, etc). It's still a better world though.
Maybe? For some people? I dunno, that sounds like it would mostly be worse for me, to have fewer points and fewer places that take cards. But even if it's better, it definitely doesn't seem "solved" to me... I think "solved" would be more like, fraud protection without credit, competition among card processing network driving merchant costs to access a network very low, people almost entirely using convenient fraud-protected debit cards like cash.
Yeah, you might be right. But I'd be less inclined to use a CC if I wasn't getting cash back, so they'd face more competition from debit cards, cash, etc. And, if they refused to lower their fees, I think some (more) merchants would just stop accepting credit cards.
I think essentially everyone would keep using their credit cards just as much, because debit cards are significantly riskier (to the consumer) from a fraud standpoint, and cash is significantly less convenient.
Merchants can already stop accepting credit cards due to the fees. Why don't they? Because it would make their customers mad. Few businesses have customers who are more loyal to them than they are to their own (even minor) convenience. I do have a local restaurant I go to that doesn't accept credit cards and is packed nonetheless, but it's a rare feat. The points have a little bit to do with this, but not nearly as much as the convenience.
What would change is that credit card companies would have more trouble luring people to switch away from their existing card to a new one. But they'd have a huge amount of extra money to spend on advertising to make up for that.
Merchants can already stop accepting credit cards due to the fees. Why don't they? Because it would make their customers mad. Few businesses have customers who are more loyal to them than they are to their own (even minor) convenience. I do have a local restaurant I go to that doesn't accept credit cards and is packed nonetheless, but it's a rare feat. The points have a little bit to do with this, but not nearly as much as the convenience.
What would change is that credit card companies would have more trouble luring people to switch away from their existing card to a new one. But they'd have a huge amount of extra money to spend on advertising to make up for that.
> When I first moved to North America, the idea that a credit card company was allowed to give people cash back, offer insurance, etc. for using their cards seemed like some bizarroworld "how is this legal" concept. Having lived here for decades, it still is. It's like an alcohol shop rewarding its most alcoholic customers by giving them free booze.
Should businesses not be allowed to offer perks to their customers in order to get an edge over their competitors? Your example involving an alcohol shop only seems weird because it involves an addictive substance. I doubt people would describe hotel or supermarket loyalty programs as some "bizarroworld "how is this legal" concept".
Should businesses not be allowed to offer perks to their customers in order to get an edge over their competitors? Your example involving an alcohol shop only seems weird because it involves an addictive substance. I doubt people would describe hotel or supermarket loyalty programs as some "bizarroworld "how is this legal" concept".
Presumably the analogy is between an addictive substance (alcohol) and an addictive behavior (overspending on credit). Each can be used responsibly or not.
You haven't taken into account the US ideal of a bifurcated society, and are probably imagining some singular credit card user archtype who relies on the credit and also benefits from the rewards. I personally am able to set my credit cards to autopay in full every month, so CC rewards are just a straightforward discount [0]. And I'd guess anybody that talks about rewards as prudent financial advice is in a similar boat. Whereas for the disempowered person who can only pay part of their balance, rewards are just another cognitive hazard to avoid being swayed by, lest they get milked even harder.
As for the original topic, I personally hate seeing the echo of my spending in a monthly statement. It's like making the decision to buy everything twice, even for things that are straightforwardly necessary or prudent.
[0] with the tradeoff of the transaction going in more surveillance databases and being solidly connected to my government-issued nym, of course
As for the original topic, I personally hate seeing the echo of my spending in a monthly statement. It's like making the decision to buy everything twice, even for things that are straightforwardly necessary or prudent.
[0] with the tradeoff of the transaction going in more surveillance databases and being solidly connected to my government-issued nym, of course
Furthermore, everyone, regardless of whether they are using a credit card, is paying for this in the form of higher prices (unless the vendor has separate cash prices...)
Some of my favorite restaurants give a 3% cash discount
Higher cash prices are a violation of the card-holder agreement.
kldavis4 was meaning that everyone pays the same higher price to account for the fees present in card payment processing, regardless of whether they are paying in cash, be debit card, or by credit card.
> Higher cash prices are a violation of the card-holder agreement.
I think what you are meaning is “higher card prices are a violation of the merchant agreement” – so a merchant can't offer different prices for cash payments to account for differences in processing costs or they risk losing their merchant account with the card/payment processing company.
In some places this is no longer legal¹, you'd have to check your local legislation to know what applies in that regard where you are.
Also the reverse, offering discounts for card use rather than cash², is illegal in some places because it is unfair to those without cards⁴.
--
[1] so card processing companies can't (legally) punish merchants for offering a discount for cash
[2] usually because the merchant gets a kick-back from the card payment processor, though sometimes these days it is because cash has become the minority payment method³ and vendors would rather only deal with one so want to further discourage cash
[3] it is worth noting while discussing potential costs or kick-backs for card payment processing, that for businesses the act of dealing with cash has associated admin and/or costs too
[4] which is disproportionately the disadvantaged, because they find it harder to qualify for any card, or can only qualify for one with a monthly charge that they can ill afford
> Higher cash prices are a violation of the card-holder agreement.
I think what you are meaning is “higher card prices are a violation of the merchant agreement” – so a merchant can't offer different prices for cash payments to account for differences in processing costs or they risk losing their merchant account with the card/payment processing company.
In some places this is no longer legal¹, you'd have to check your local legislation to know what applies in that regard where you are.
Also the reverse, offering discounts for card use rather than cash², is illegal in some places because it is unfair to those without cards⁴.
--
[1] so card processing companies can't (legally) punish merchants for offering a discount for cash
[2] usually because the merchant gets a kick-back from the card payment processor, though sometimes these days it is because cash has become the minority payment method³ and vendors would rather only deal with one so want to further discourage cash
[3] it is worth noting while discussing potential costs or kick-backs for card payment processing, that for businesses the act of dealing with cash has associated admin and/or costs too
[4] which is disproportionately the disadvantaged, because they find it harder to qualify for any card, or can only qualify for one with a monthly charge that they can ill afford
This hasn't been true since Dodd-Frank in 2010: https://en.wikipedia.org/wiki/Durbin_amendment
"included provisions which allow retailers to refuse to use credit cards for small purchases and offer incentives for using cash or another type of card."
"included provisions which allow retailers to refuse to use credit cards for small purchases and offer incentives for using cash or another type of card."
I think you mean the merchant agreement. There are many gas stations in the area where I live that have different cash prices and still take credit cards, so I'm not sure if this is still a thing. And honestly the fact that they would have that lends support to the fact that all of these credit card "benefits" are subsidized by cash payers.
> some random private company decides to rate you
Where did you move from that didn't have a private company assess your creditworthiness before issuing you a loan? If each bank/credit card company did so separately, what is the issue with outsourcing it to a specialist?
Where did you move from that didn't have a private company assess your creditworthiness before issuing you a loan? If each bank/credit card company did so separately, what is the issue with outsourcing it to a specialist?
This is not US-specific, you get the same thing (insurance on purchases, perks for spending money, credit rating) in the EU, just to a much smaller degree.
Credit cards also have some benefits in the case of theft over debit cards, because of how they work.
Credit cards also have some benefits in the case of theft over debit cards, because of how they work.
There's a liquor store near me that gives out a poker chip for every $25 you spend. You can trade 4 poker chips for a pint in their bar. Is this bad?
I feel like it'd be totally normal for any restaurant or store to give a discount to its best customers
"You're taking a lot of drugs, we're going to make sure you keep taking them by giving you free drugs" is extremely different from "you're buying a lot of bras, we're going to give you a free bra". This should not even require pointing out, but apparently it does.
But, you are begging the moral question in assuming that credit cards are obviously like "drugs".
For me, a credit card and a debit card are just different accounting systems for the same thing. Either one has zero interest when I manage my expenditures properly and do not carry a debt. Either one could trigger penalties and/or interest if I outspend my budget.
I still prefer the credit card because of the frequently mentioned difference in consumer fraud protection. My fear is that the credit card providers will eventually erode their protections to match the debit card rather than the converse.
I do NOT want to participate in a system where a chip-secured/card-present transaction is now presumed to be valid and I have a difficult battle to contest a charge. If the card is made that valuable, I would then withdraw from the casual retail marketplace and keep my card locked up in a safe as others have mentioned in other threads.
For me, a credit card and a debit card are just different accounting systems for the same thing. Either one has zero interest when I manage my expenditures properly and do not carry a debt. Either one could trigger penalties and/or interest if I outspend my budget.
I still prefer the credit card because of the frequently mentioned difference in consumer fraud protection. My fear is that the credit card providers will eventually erode their protections to match the debit card rather than the converse.
I do NOT want to participate in a system where a chip-secured/card-present transaction is now presumed to be valid and I have a difficult battle to contest a charge. If the card is made that valuable, I would then withdraw from the casual retail marketplace and keep my card locked up in a safe as others have mentioned in other threads.
Except this isn't about you. There are plenty of folks who can responsible take drugs, too, doesn't make trying to keep folks hooked any less destructive and predatory. All you're being is an outlier in the highly lucrative debt trap that credit cards offer the average credit card owner.
Congrats on not falling for it; for you, a thousand people who do.
Congrats on not falling for it; for you, a thousand people who do.
I agree, you haven't convincingly made the case that credit is more akin to drugs than a restaurant or a bra store (the 1:1000 statistic in particular is suspect), and it seems your entire point depends on that case being true.
Restaurants and bra stores, for example, also want to keep customers hooked. Does that make restaurants & bra stores predatory? Neither they nor credit card companies are forcing their customers to spend more than they can afford.
Restaurants and bra stores, for example, also want to keep customers hooked. Does that make restaurants & bra stores predatory? Neither they nor credit card companies are forcing their customers to spend more than they can afford.
no, absolutely no debit cards for me. i protect my cash with multiple layers of protection. if i lose my wallet or my phone the person who ends up with these things will have no clue where most of my money is at.
amex takes most if not all the risk in my financial life when it comes to day to day spending. one time i had my wallet stolen and the only thing they could muster was a failed gas station transaction. they didn't even try the ATM card.
i use the free points/perks that the irresponsible idiots subsidize to my own advantage. it's linked directly to my amazon account and shows up as a positive cash balance.
amex takes most if not all the risk in my financial life when it comes to day to day spending. one time i had my wallet stolen and the only thing they could muster was a failed gas station transaction. they didn't even try the ATM card.
i use the free points/perks that the irresponsible idiots subsidize to my own advantage. it's linked directly to my amazon account and shows up as a positive cash balance.
Is your ATM card not also a debit card? Mine have always been both.
You can get ATM-only cards, but you have to ask for them, and keep asking... at my credit union, I had an ATM-only card for a while, but when it expired, they sent a debit card and I didn't think it was worth the effort and waste to request they make and send a new ATM-only card at that point.
mine is but I have a system very similar to the OP you responded to. I do not carry my debit card unless under specific circumstances (ie: When i traveled to Vietnam I carried it). Also that specific debit card is tied to a limited account with a minimum balance. Enough to take cash out but not the main account i pay bills out of etc. Its used specifically as a medium for transactions to services (ie: Venmo, CashApp or ATM withdraws) with a limited balance in case its comprimised.
My primary bank account debit card never leaves the safe unless for a specific trip to the ATM etc, even then most of the time i got to a branch directly.
Vendors (ie: Stores, Restaurants etc) will not ever swipe even my debit card first discussed. That goes through Amex or a backup Visa card. Those balances are paid in full monthly via bill pay from the main bank account.
My wife also has a similar auxilliary bank account+debit card with minimum balances but generally also uses Amex or the Visa CC on that account.
So we structure our finances this way
1. Primary Joint Account + Savings - Pay bills out of only. No ETF allowed or ATM allowed in general.
2. Secondary Joint Account + Savings (both his and hers) - use for special uses, ie: Venmo, CashApp ETF, ATM
3. Primary CC accounts - Amex, Visa (his and hers) - used for day to day purchasing. Paid in full monthly via #1.
My primary bank account debit card never leaves the safe unless for a specific trip to the ATM etc, even then most of the time i got to a branch directly.
Vendors (ie: Stores, Restaurants etc) will not ever swipe even my debit card first discussed. That goes through Amex or a backup Visa card. Those balances are paid in full monthly via bill pay from the main bank account.
My wife also has a similar auxilliary bank account+debit card with minimum balances but generally also uses Amex or the Visa CC on that account.
So we structure our finances this way
1. Primary Joint Account + Savings - Pay bills out of only. No ETF allowed or ATM allowed in general.
2. Secondary Joint Account + Savings (both his and hers) - use for special uses, ie: Venmo, CashApp ETF, ATM
3. Primary CC accounts - Amex, Visa (his and hers) - used for day to day purchasing. Paid in full monthly via #1.
From the article:
"Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card. The researchers found that people with the debit card were more likely to use cash to make a harder-to justify purchase (in this case, a party-sized bag of M&M’s). However, those with a prepaid card used it as often as cash to buy the candy."
Doesn't that study control for specifically that counter claim?
"Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card. The researchers found that people with the debit card were more likely to use cash to make a harder-to justify purchase (in this case, a party-sized bag of M&M’s). However, those with a prepaid card used it as often as cash to buy the candy."
Doesn't that study control for specifically that counter claim?
I carry and use cash by default for general privacy reasons, but also use a card sometimes. In looking at the two purchases, it seems that I'll use a card when the amount of the purchase is high enough that I am not likely to have the cash in my pocket and in urgent (I wanted to say "emergency", but not just actual emergencies) situations.
If it's a purchase of under $10 or so, I'm exceptionally unlikely to use a card -- and I suspect that most of my impulse/fun purchases (like a foam finger would be if that was my thing) would be in cash for that reason, not because I felt an guilt about them.
If it's a purchase of under $10 or so, I'm exceptionally unlikely to use a card -- and I suspect that most of my impulse/fun purchases (like a foam finger would be if that was my thing) would be in cash for that reason, not because I felt an guilt about them.
When I pay with cash, all purchases are essentially rounded up to the Dollar, since I will literally never end up spending my change anywhere once it enters coin form.
I'm curious: Do you go grocery-shopping yourself? If yes, do you use a self-checkout option? And if yes, does it support paying with cash?
In my case, the answer to all the above is "yes", and I found paying with cash is a good way of getting rid of the change that I've built up. Every self-checkout I've come across that supports cash will also support splitting payments, allowing me to pay the rest with credit card.
In my case, the answer to all the above is "yes", and I found paying with cash is a good way of getting rid of the change that I've built up. Every self-checkout I've come across that supports cash will also support splitting payments, allowing me to pay the rest with credit card.
While that's certainly an option, it would require both that I remember to grab my accumulated coins before leaving for the shop and that I spend extra time feeding them into the machine. These friction points will probably lead me to my current path of least resistance, tossing my coins into a container on my dresser and dealing with them about once a decade when it fills up.
Self checkout machines around me have just a port you dump all the coins in at once and it counts them up.
Same, I take all of my coins to the grocery store and dump them in before finishing off whatever's left with my card. It takes some time to get the machine to take them all so I don't do it if there's a queue behind me but otherwise it's great for quickly getting rid of the coins without them just vanishing into the aether.
I also have a corner store that loves to get my coins. I suspect he has to make awkward change more often than a big-box store does because when I pull out my $3 in quarters before breaking out the paper bills he always thanks me for it
I also have a corner store that loves to get my coins. I suspect he has to make awkward change more often than a big-box store does because when I pull out my $3 in quarters before breaking out the paper bills he always thanks me for it
[deleted]
The time spent handling small coins is actually worth more than the coins themselves. If you value your free time somewhere in the ballpark of $80/hr, then you should spend no more than 2 seconds acquiring, maintaining possession of, and then spending, a nickel. IMO, that makes anything less than a quarter worthless.
I started doing that a year or two ago. A self checkout won't get angry with you for pulling out a bunch of change and having to count it. And I'm usually shopping during off hours (~9 PM), so no one else is around to get annoyed either.
Necessary caveat on the current state of irreproducibility and outright fraud in Behavioural economics. See, for example, the thread a few days back about Dan Ariely:
https://news.ycombinator.com/item?id=36684242
https://news.ycombinator.com/item?id=36684242
This sorta meshes with how I tend to think of cash. I essentially consider withdrawn cash as already "spent" the moment it leaves my account. So when I do get around to spending that cash (especially on something frivolous) there's less of a hangup over it.
Same—though I didn't used to do that back when 1) I had a whole lot less money, and 2) I used cash way more often.
Now, if I have cash, it's almost always because I intend to spend it, usually for some purpose or activity or over some time period. It's not going back in the bank. Any left over or if plans change, I'll just spend it on whatever. It's "already spent". If it leaves the bank account, it's gone.
Now, if I have cash, it's almost always because I intend to spend it, usually for some purpose or activity or over some time period. It's not going back in the bank. Any left over or if plans change, I'll just spend it on whatever. It's "already spent". If it leaves the bank account, it's gone.
This goes against everything I'm familiar with around budgeting.
One of the big tricks to getting your budget in check is to pay cash so you can see the money leaving your wallet. Swiping a credit card makes that all invisible
One of the big tricks to getting your budget in check is to pay cash so you can see the money leaving your wallet. Swiping a credit card makes that all invisible
IMO, that's outdated advice from the days before online automatic bookkeeping, before credit card transactions were immediately visible online, before your bank could auto-classify your credit card purchases into spending categories, before configurable spending alerts, before budgeting apps with bank integration, etc.
If you spend cash, you don't benefit from any of that and as soon as you forget about the transaction, it's like it never happened. Nothing will be able to help you retrospectively see where your cash is going. You can lie to yourself about it. Charges on a card statement don't lie.
If you spend cash, you don't benefit from any of that and as soon as you forget about the transaction, it's like it never happened. Nothing will be able to help you retrospectively see where your cash is going. You can lie to yourself about it. Charges on a card statement don't lie.
It's not. The point of cash is to make you more psychologically aware of what you're spending so that you're less likely to buy something you don't need in the first place.
All of the online transaction tracking only helps with purchases that you've already made, so you can say "maybe I shouldn't have done that"...after the fact.
Cash based budgeting works beautifully, but it requires a change from what you're used to and there are certainly trade offs. If you're looking to save money though, cash budgeting is like magic.
All of the online transaction tracking only helps with purchases that you've already made, so you can say "maybe I shouldn't have done that"...after the fact.
Cash based budgeting works beautifully, but it requires a change from what you're used to and there are certainly trade offs. If you're looking to save money though, cash budgeting is like magic.
I'm sure it does work for some people, but the popularity and success of budgeting apps suggests that it's not for everyone. The tradeoffs you mention are all of the accountability features I mentioned. The article is reporting on research that suggests that unaccountable cash spending is a problem for many people.
It comes down to how you budget and pay your bills. If you take out large chunks of cash at a time then psychologically seeing the cash leave your wallet might personally help you if you treat budgeting as a once a month task. It's easy to get into trouble with a credit card if you never look at your transactions until the end of the month and treat the amount on your statement as a big blob you just have to pay while just glancing through your statement.
If you actually use budgeting tools like YNAB which get you into the habit of spending a couple minutes every morning to confirm and categorize where your money went you end up with all the psychological benefits of cash, it's impossible to forget a transaction, you know exactly where your money went for years, and you end up with even more money due to the credit card rewards. I also usually take that time every morning to pay or partially pay on all my cards to make it even more obvious the cash that is leaving my checking account each day.
If you actually use budgeting tools like YNAB which get you into the habit of spending a couple minutes every morning to confirm and categorize where your money went you end up with all the psychological benefits of cash, it's impossible to forget a transaction, you know exactly where your money went for years, and you end up with even more money due to the credit card rewards. I also usually take that time every morning to pay or partially pay on all my cards to make it even more obvious the cash that is leaving my checking account each day.
If you pay with cash then once your wallet is empty you’re done. I could spend far more on my credit cards than I actually have if I wanted to.
If you do then you can enjoy yourself the night, and limit your purchases for the rest of month.
You also would have more money in your account if you had been getting the credit card rewards for years and could extend your night without spending more than you have.
You also would have more money in your account if you had been getting the credit card rewards for years and could extend your night without spending more than you have.
It really depends on the person. I found that budgeting apps with bank integrations were quick and convenience, but I wound up in the trap of only doing the most superficial analysis. ("Yep, sure did spend that much.") For myself, manually logging purchases is far more effective. It's a similar observation as I had in college, where I found that hand-writing my notes helped me learn better than typing them.
For me, I need to have it the other way around. Regular withdrawals of similar amounts on my bank statement tell me nothing about how I spent my money a month from now.
When paying with card, I leave a paper trail for myself to review later. I can also look at my banking app anytime I want to check how much is left. I actually do that before most purchases that go beyond a few bucks.
When paying with card, I leave a paper trail for myself to review later. I can also look at my banking app anytime I want to check how much is left. I actually do that before most purchases that go beyond a few bucks.
While I could make the same reply to almost every comment in this thread I have chosen yours at random.
I believe you are conflating the goal of "spending less" (which is hard) with a simpler goal "knowing more about how I spent my money" (which is easy). You claim to review your paper trail to gain insights, but again, even if you truly did this consistently (and knowing human nature, I doubt that you do) this in no way means you spend less.
I believe you are conflating the goal of "spending less" (which is hard) with a simpler goal "knowing more about how I spent my money" (which is easy). You claim to review your paper trail to gain insights, but again, even if you truly did this consistently (and knowing human nature, I doubt that you do) this in no way means you spend less.
You are right, I left out an important part of my budgeting setup: Every month, after income, everything above a set amount is transferred automatically into a savings account. So at the beginning of each month, I have the same amount of money in my checking account.
Still, even just the number going down tells me exactly how much money I have spent this month – like looking into my wallet would. But I have the added benefit of knowing what I spent it on even long after the purchase.
I don't always review the paper trail, only if my spending is higher than what I expected it to be. But I always check the balance before any bigger purchase. In both cases, I know to spend less in advance and can make an informed decision.
* I am translating from German here using some quick Google searches. I hope these account types make sense for a US reader.
Still, even just the number going down tells me exactly how much money I have spent this month – like looking into my wallet would. But I have the added benefit of knowing what I spent it on even long after the purchase.
I don't always review the paper trail, only if my spending is higher than what I expected it to be. But I always check the balance before any bigger purchase. In both cases, I know to spend less in advance and can make an informed decision.
* I am translating from German here using some quick Google searches. I hope these account types make sense for a US reader.
I've heard that said, but it doesn't feel right.
When I pay by card I have to ask myself: is there enough money in my spending account? Is this transaction going to fail? (I keep that balance low on purpose).
Cash lets me sidestep the accounting: if I have it here at all it's pre-approved for spending. Lower cognitive burden there at the POS = easier to part with.
Maybe that would be different if I did anything important in cash.
When I pay by card I have to ask myself: is there enough money in my spending account? Is this transaction going to fail? (I keep that balance low on purpose).
Cash lets me sidestep the accounting: if I have it here at all it's pre-approved for spending. Lower cognitive burden there at the POS = easier to part with.
Maybe that would be different if I did anything important in cash.
“I spent $100 on incidentals”
Vs
“I spent $100 on pizza and beer”
Cash doesn’t sit there in your ledger month after month reminding you of your weakness. Instead you have a generic line-item that doesn’t threaten your ego; it could be anything.
You will never know you spent $1200 a year on junk food and booze. It’s just some vague category you can safely manage.
Vs
“I spent $100 on pizza and beer”
Cash doesn’t sit there in your ledger month after month reminding you of your weakness. Instead you have a generic line-item that doesn’t threaten your ego; it could be anything.
You will never know you spent $1200 a year on junk food and booze. It’s just some vague category you can safely manage.
About the only place I spend cash regularly is the farmers market. I typically take out 80-120 dollars on my way to the market and come home with anywhere from 0-60 dollars and a pile of produce. I also probably bought coffee and something for breakfast. As far as spending goes, I know the money probably went towards food (or was it flowers or some crafty thing?) but it's really just a black hole where I ultimately end up categorizing it as "cash spending" in my budget software rather than trying to rebuild where exactly it went.
Credit cards work much better for me.
Credit cards work much better for me.
I think this is ignoring that different approaches to budgeting are needed for different people.
For me, I have a Monzo account that I put my monthly "disposable" income in. Monzo is a (mostly) UK digital bank with a good app that gives instant feedback on transactions. This means that after every transaction, Monzo tells me "you have £X left this month". This allows me to regulate my spending (e.g. not buy X until next month) if I've spent a lot of my budget half way through the month. It also means that when I'm spending a lot I can go and look at my transaction history for the last few months and work out where it's going so I know what spending to moderate. With cash that's just a black hole.
Also, I just find cash to be a pain to deal with and have basically eliminated it from my life. You have to regularly visit machines to make sure you've got some, you have to carry it around (notes are fine, coins are annoying), you have to faff when paying to give and receive the correct change.
For me, I have a Monzo account that I put my monthly "disposable" income in. Monzo is a (mostly) UK digital bank with a good app that gives instant feedback on transactions. This means that after every transaction, Monzo tells me "you have £X left this month". This allows me to regulate my spending (e.g. not buy X until next month) if I've spent a lot of my budget half way through the month. It also means that when I'm spending a lot I can go and look at my transaction history for the last few months and work out where it's going so I know what spending to moderate. With cash that's just a black hole.
Also, I just find cash to be a pain to deal with and have basically eliminated it from my life. You have to regularly visit machines to make sure you've got some, you have to carry it around (notes are fine, coins are annoying), you have to faff when paying to give and receive the correct change.
The research is on your side. Spending cash makes you spend less. Most respondents to your comment are making a category of error that is common in our Internet age: "I have more information, therefore I am making better decisions."
This article is also a summary of research and it offers a disagreement. Just saying "I have research" isn't persuasive when the article at hand is newer research.
This is the paper being discussed: https://www.gsb.stanford.edu/faculty-research/publications/p...
This is the paper being discussed: https://www.gsb.stanford.edu/faculty-research/publications/p...
I can easily see both depending on how diligently people track their spending. I have a budgeting system setup that adds a task to my daily to-do list if my bank balance differs from what is in my hledger files (ie if I have transactions in my bank account that I have not yet put into hledger). The chances of me not being aware of on-card spending is extremely low. Cash money is not tracked nearly as accurately though, I don't bother tracking it when I spend a few euro on some sandwich from a roadside stall.
Can I ask how you get the current balance from your bank (i.e., do you have a bank that provides a nice API, or is there another trick you're using)? I've spent a lot of time looking for a way to automatically download transactions from all my accounts but still have to either enter them by hand or manually log in and download a CSV to import.
That sounds like a pretty interesting setup, how do you have it work with your bank accounts?
It's extremely hacky and there is barely any automation at all. Everyday at 0500 a cronjob uses https://github.com/djc/abna to fetch the bank balance and makes no effort at all to automatically parse more than the balance. It then compares that with what the balance "should" be according to hledger and sets up a todo item if there is any difference. Somewhere during the day I manually reconcile the two and check off the todo item.
I'm sure it could be smarter with automatic parsing and whatnot, but I actually kinda like the manual action. It makes sure I'm aware of everything happening to my bank account. Time spent per day is actually quite low because it's kept updated and there is never any big backlog of transactions. I would say it takes 2-3 minutes if there are any transactions, or zero ofc if I didn't spend anything.
I'm sure it could be smarter with automatic parsing and whatnot, but I actually kinda like the manual action. It makes sure I'm aware of everything happening to my bank account. Time spent per day is actually quite low because it's kept updated and there is never any big backlog of transactions. I would say it takes 2-3 minutes if there are any transactions, or zero ofc if I didn't spend anything.
This is more about hiding/perpetuating bad habits vs enabling stupid purchases. Not about impulsively buying something just because it was on sale, but rather buying something you know you shouldn't... but it's just this once, I promise! No more after just this last one...
I did this a long time ago, for a while I kept myself on a strict monthly cash budget to deal with some debts. In those days it was still relatively easy to get everything you needed locally for cash. It did mean that it didn't really matter that much what you were spending your money on, as long as the total didn't exceed the budget. You just had to be conscious of the choices. Even now, with the debts paid off I still live that way--I don't buy things unless I know I can pay for it, and I save some money every month. And I don't care that much about the details. I like spending cash just so I can forget about it. Do I really need an eternal record of that scone I bought on the way to work last week? I do not need that.
On the other hand, I can book keep all my electronic transactions thanks to the many Yodlee-powered sites whereas the effort it takes to do that for cash transactions is phenomenal.
My personal experiment in 2013 exactly matches your comment. I spent less when I used cash. I withdraw the same amount if monwy every month once a month, but the action of giving that money to cashier & checking the change and sorting out the notes in wallet made it real impact.
Uhhh what. Credit gives you a literal list of all the dumb purchase you made.
Cash is just pieces of paper.
Cash is just pieces of paper.
How strange - if I use my card it stings, I know I'll see it later (and I tend to tally up monthly expenses from CC statements). Cash in my wallet feels almost like free money by comparison.
Looks like people are divided on this - I would say, when paying by card, it only stings once (if you even bother to go through the list regularly); when paying with cash, it stings twice: once when you have to fork out the actual money, and a second time when you realize you are out of cash (again) and have to get more from an ATM.
It depends on the person I suppose. I use cash rarely (mostly for tradespeople who are evading taxes) and when I "run out of cash" I don't really think more of it than when I run out of toilet paper.
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Obviously you pay cash so it doesn't affect your social credit score.
I always pay cash at the bar- it's an easy way to realize you're spending too much compared to just opening a tab. Plus you don't get stuck closing out if you wait too long.
I always pay cash at the bar- it's an easy way to realize you're spending too much compared to just opening a tab. Plus you don't get stuck closing out if you wait too long.
"social credit score"?
Ok, I live in the US, we don't have one of those. We do have a bunch of companies, insurers and otherwise, that want to assign some sort of risk score to you. Credit card companies will happily part way with transaction data.
*If you're wondering: I have a credit card. I don't really care if some data broker knows that I bought pants or paid my water bill.
*If you're wondering: I have a credit card. I don't really care if some data broker knows that I bought pants or paid my water bill.
In Europe, all electronic transactions are shared between at least a dozen unclear public-private entities.
I am not aware of a "social credit score" around these parts, but I do not have cards and I do very strictly care that privacy remains respected.
I am not aware of a "social credit score" around these parts, but I do not have cards and I do very strictly care that privacy remains respected.
adastra22(1)
Agreed. It's a good way to create a hard limit. It's also just a lot faster in a setting like that and I can just hand them the cash with tip included and leave, hard capping the drinks for the benefit of my wallet and my health.
Basically correct. People do this to avoid detection from surveillance. Including, for some, their spouse.
Or just pay as you go with your credit card as there really is no upside to opening a tab or paying in cash if you have a credit card. If the bar is so busy that you think you're saving time by paying in cash, you're wasting that time else where by going to the ATM and making sure you have the right collection of bills to pay in exact change. If you're getting change even once then you're making the server spend even longer on the return trip to you by having to get the exact bills and change needed for you, instead of tapping your card. You also don't get the credit card rewards, which for someone with a good mix of cards is easily thousands of dollars at the end of the year added up over all the transactions. Bars and restaurants are established high reward categories.
$20 to $50 in my wallet usually lasts me a month or more at this point. There are a few well established bars and restaurants that force the burden on the customer by not accepting cards, but they nearly always have an on-site ATM. Many of them that are not outright amazing and lived on by their reputation from their longevity have started taking cards. Nobody would even dream of opening a new place that was cash only.
$20 to $50 in my wallet usually lasts me a month or more at this point. There are a few well established bars and restaurants that force the burden on the customer by not accepting cards, but they nearly always have an on-site ATM. Many of them that are not outright amazing and lived on by their reputation from their longevity have started taking cards. Nobody would even dream of opening a new place that was cash only.
At bars, I'll open a tab with a card, then tip on the first round with cash. Then at the end of the night I'll tip for subsequent rounds on the card. I don't want to do a bunch of scribbling on a receipt after each order, and I want to establish that I'm willing to tip well early to get quicker service. It's definitely the ideal solution.
I keep a good mix of ones, fives, and tens. I also use a credit card for most expenses.
I also use a CC for most expenses, but besides small bills, I like to have a handful of large bills (1 or 2 hundreds, a fifty, a handful of twenties) because large bills are a great way to ask for favors. Nobody's going to remember a 10 you hand them, but a 20 is going to stay in their head. A fifty or hundred is going to sit in their wallet, and be a recurring reminder. My rule of thumb is that asking someone to commit to doing something they probably would have done for free is a twenty, asking someone to bend the rules a bit through inaction is a fifty, and asking someone to act in my favor in exception to the rules is a hundred.
I use cash so rarely that I end up at the bar (or wherever) with a stack of 20s.
> But more detailed record-keeping may undermine financial apps’ usefulness. “If people know that there’s going to be a record every time they use Apple Pay, based on our theory, people actually will use it less compared to if Apple Pay doesn’t automatically track and record and remind them in the statement.”
This is so weird to me since I want to know how much I spend in any category. I’m annoyed only one of my linked Apple Pay cards reports transactions off Apple Pay (my AmEx).
The study specifically says it looked only at cases where “the payment method hadn’t been decided beforehand” but that strikes me as really weird. Everyone I know knows how they’re going to pay for a purchase before they walk into a store, mostly because walking into a store has become so intentional. You are either carrying (sufficient) cash on you or not. You either have enough credit on your card or not. And, honestly, for most people in the USA of my generation (so-called “millennials”) if there’s any thinking involved it might be “which card do I charge this to” and not “cash or credit?”
Also as with other studies making claims like these I immediately wonder about reproducibility.
This is so weird to me since I want to know how much I spend in any category. I’m annoyed only one of my linked Apple Pay cards reports transactions off Apple Pay (my AmEx).
The study specifically says it looked only at cases where “the payment method hadn’t been decided beforehand” but that strikes me as really weird. Everyone I know knows how they’re going to pay for a purchase before they walk into a store, mostly because walking into a store has become so intentional. You are either carrying (sufficient) cash on you or not. You either have enough credit on your card or not. And, honestly, for most people in the USA of my generation (so-called “millennials”) if there’s any thinking involved it might be “which card do I charge this to” and not “cash or credit?”
Also as with other studies making claims like these I immediately wonder about reproducibility.
I assure you there are people that haven't decided how to pay for something before they reach the register. There's also a lot of people that will decide how to pay for something based on how much the purchase is at the register. Both of those examples are anecdotal, and come from working a register some decade and a half ago. Anecdotally, I bring cash with me when I go on vacation. I never really thought about it so much as guilt, but you could probably characterize it somewhat as that. It's at least done partially for budgetary reasons, but I'm sure subconsciously I really don't want to remember spending $80 at the Tiki bar.
As for the reproducibility it looks like, from the article, that they at least constructed several simular studies to test their theory:
1. "In one study, the authors analyzed more than 118,000 real-world purchases at the Stanford University Bookstore."
2. "Another study asked participants to imagine buying a 30-minute reiki session. Half read that the session was recommended by their doctor and would be at a hospital..."
3. "Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card."
It's at least not a single, "3 grad students did this in an afternoon at the 7-11" study that tend to get picked up. I don't doubt that more research into the phenomenon might help get a better understanding of the underlying motivations for "cash/credit", but it does look like they are getting similar results from multiple experiments.
As for the reproducibility it looks like, from the article, that they at least constructed several simular studies to test their theory:
1. "In one study, the authors analyzed more than 118,000 real-world purchases at the Stanford University Bookstore."
2. "Another study asked participants to imagine buying a 30-minute reiki session. Half read that the session was recommended by their doctor and would be at a hospital..."
3. "Another study explored shoppers’ preference for untraceable payment methods besides cash. Half the participants were informed they had a $20 bill and a debit card linked to their bank account; the other half were told they had a $20 bill and a prepaid debit card."
It's at least not a single, "3 grad students did this in an afternoon at the 7-11" study that tend to get picked up. I don't doubt that more research into the phenomenon might help get a better understanding of the underlying motivations for "cash/credit", but it does look like they are getting similar results from multiple experiments.
> This is so weird to me since I want to know how much I spend in any category.
So do I -- I would just prefer that Apple (or insert any other company in their place) didn't have access to that information. I can keep track of my own spending, I don't need a company to do it for me.
So do I -- I would just prefer that Apple (or insert any other company in their place) didn't have access to that information. I can keep track of my own spending, I don't need a company to do it for me.
Lots of small businesses do "cash no tax". It's not forgotten when it's spent. I've fixed my car in cash (primarily to save on tax; and to not have it known by insurance). It's hard for one to "amnesia" $5000 in cash. It's a tool, just like a credit card.
I've never seen anyone do this. But, unless the small business is committing fraud, they are then eating the tax. I don't a small business is going to willing pay 10% (or whatever the tax is)
I sometimes saw my dad doing this in Britain, where it is certainly tax evasion. He'd ask the price of a service, then ask if there was a discount for "cash in hand". Occasionally, I think tradesmen would offer both prices upfront, or say "will you be needing a receipt?".
It would have been a 15% discount for my dad (VAT was 17.5%), and probably a slightly larger saving for the tradesman, although they have a higher penalty if somehow caught. I think it was usually done for small jobs, like minor plumbing fixes.
I have no idea how common this was in the 1990s, or how common it is now.
It would have been a 15% discount for my dad (VAT was 17.5%), and probably a slightly larger saving for the tradesman, although they have a higher penalty if somehow caught. I think it was usually done for small jobs, like minor plumbing fixes.
I have no idea how common this was in the 1990s, or how common it is now.
I haven't either but I regularly see 3-5% cash discounts. Tax is 10% in my locality, in lower tax places it makes sense
As in, they use tax to avoid reporting the earnings? That works fine for the scale of a lemonade stand.
Is that legal?
Yes, and recently legal/not penalized for all credit cards in the US to advertise cash price and automatically add a fee for credit card purchases that is lightly advertised at point of sale
Someone else can come behind me and cite the court case/credit card guidance
Someone else can come behind me and cite the court case/credit card guidance
Yes, it's generally legal to apply an additional surcharge on card transactions beyond the cash price, thus making it appear as if the sales tax is being removed. It's all above board as long as the full value of the sale is reported and taxed (exact details vary by tax code, of course).
It's generally illegal, however, for a business to evade taxes by failing to report the full value of cash sales. It's also legally dubious as a customer to knowingly help facilitate such transactions (e.g.: anti-laundering laws)... but I don't think it's common to catch heat for this if you're an otherwise law-abiding person.
It's generally illegal, however, for a business to evade taxes by failing to report the full value of cash sales. It's also legally dubious as a customer to knowingly help facilitate such transactions (e.g.: anti-laundering laws)... but I don't think it's common to catch heat for this if you're an otherwise law-abiding person.
I use cash at small businesses to get a 1%-5% discount. The study seems to skip this use case.
I'm more into how likely it is someone will run up an extra charge on my card, or how much of a pain their POS system is. (Can it split checks? Do I have to sign on a touch screen with my fingernail? Is performance so bad it acts like the credit card terminal is on dialup and the line is in use? Encountered all three of those in the last month.)
Meh. Come out with the hard truth, most expenditures we make are not fulfilling. The idea that we are spending money to gain something is a bullshit lie we convince ourselves of. Unfortunately non-tangible investments are the most terrifying expenditures. You physically have nothing to show for the money you no longer have and you question its validity and go so far as to course correct and buy something you can hold onto forever. What are these expenditures? Donations, endowments, and just using some of your means to give to someone who can benefit more than you could ever imagine. You know your neighbor who could use a night off, deliver dinner to them and their family. Your cousin who just got out on his own, deliver a weeks worth of essentials from Walmart. I could go on and on, but my personal way of expending my disposable income now a days is to do a free to sub-$100 favor for someone I know would appreciate help, but is too proud to ever ask for something that they weren’t deathly desperate of needing. You come off as an empathetic and generous human being and you don’t ever feel taken advantage of because you’re the one who initiated it.
If you don't have a lot of money this is true. I think the opposite happens if you are rich.
How quaint. Countries around the world are gradually phasing out cash, and forcing banks to report any transactions that add up to more than $600. They want the tax revenue and ultimate control — but they’ll claim it’s mostly to prevent “money laundering”.
This is like analyzing the details of how people use vinyl records to play music. It won’t matter in 1-2 decades.
This is like analyzing the details of how people use vinyl records to play music. It won’t matter in 1-2 decades.
America started to do this to try to collect taxes on small transactions. Not to prevent money laundering.
And I don't mind it at all.
Unreported cash transactions create a whole separate economy that is exploited.
Take your local AC guy. Writes receipts, reports income, charges sales tax, gives the employees insurance etc...
Now the other guy, who doesn't do anything, and because of that is able to undercut the guy above by 10%.
Short term? Great, your AC is 10% cheaper. Long term? You got 5 people in your neighborhood who lost their job because a law that's there to protect them isn't enforced.
Unreported cash transactions create a whole separate economy that is exploited.
Take your local AC guy. Writes receipts, reports income, charges sales tax, gives the employees insurance etc...
Now the other guy, who doesn't do anything, and because of that is able to undercut the guy above by 10%.
Short term? Great, your AC is 10% cheaper. Long term? You got 5 people in your neighborhood who lost their job because a law that's there to protect them isn't enforced.
I wonder if you would mind when this happens to you: https://www.theverge.com/2019/3/1/18246297/china-transportat...
Or maybe this: https://www.nytimes.com/2022/02/22/world/americas/canada-pro...
Or maybe this: https://www.nytimes.com/2022/02/22/world/americas/canada-pro...
I'm not in the business of paying higher prices to keep people employed.
Nah. Nothing induces guilt more than finding my wallet is empty again.
Ugh, why is this an academic paper? Isn't that super obvious?
Things that are "super obvious" aren't always true.
When I pay for something with cash I remember it far more strongly than when I pay with card. I pay with a card all the time and the action is the same no matter the price. I tap it and move on.
With cash I remember having to go get the cash, counting out the right amount at the register, and physically handing it over. And then I notice its absence since now I gave up all the cash I had and need to go to the ATM again. I see and feel the loss more strongly.
You actually lose something physical when you pay with cash unlike with a card. Especially if its a large purchase, I feel the cash loss harder and remember it longer - hard to forget handing over several bills ($50+) for those expensive transactions.