Gopesh Sharma
by Gopesh Sharma
8 min read

Categories

  • Budgeting

Tags

  • beginner
  • budgeting
  • credit card
  • debit card
Budget Blunders: The Dangers of Using Debit and Credit Cards

Ever thought that what would have happened to your spending if you don’t own any cards be it credit or debit card. The spending will decrease because these cards make it easier to overspend. The cards allow for instant and convenient purchases without the need to hand over cash.

When you are using credit and debit cards, it becomes difficult to track the spending. Thus you actually lose track of your budget. Though we cannot blame the cards alone. It is also individual’s spending habits which makes them lose the track of spending. And because of that they are not able to follow the budget.

Credit and Debit Card’s Usage Advantage and Disadvantage

Both credit cards and debit cards have become an integral part of everyone’s lives. The biggest advantage of having them is that they provide us with convenience. The convenience of paying any amount anywhere. Along with that the security of not carrying the cash around. But if not done properly these benefits become drawbacks. This convenience makes us overspend and thus leads to financial troubles.

So when we overspend our budget goes for a toss. This is because when we use cards we don’t see the exchange of money. So it makes it harder to track down our spending. And thus we tend to overspend and exceed our budget. Especially when we use a Credit card which comes with a credit. We feel that we have the money to spend which leads us to make purchases we cannot afford. And because of that, our monthly expenses increased because now we have to pay the credit card dues. Along with that the rewards and perks offered by these credit cards also make it easier for us to overspend. This is because we have the temptation of earning more rewards by making more purchases.

Thus we have to be very careful as well as responsible while using credit cards and debit cards. We should be aware of these potential pitfalls. And keep track of our spending and try to use cash or prepaid cards as much as possible for our everyday expenses. It’s not that we should not use Credit Cards at all. We should use credit cards for larger purchases or emergencies. Along with that try to come out of credit card debt as soon as possible.

Advantages:

  1. Convenience: Credit cards allow you to make purchases without carrying cash. In this way, it makes it easier to overspend because you don’t see the physical exchange of money.

  2. Security: Credit and debit cards offer extra security for purchases, as they can be cancelled or replaced if lost or stolen.

  3. Credit Building: If we use credit cards responsibly, it can help to build our credit history. These credit histories are beneficial for future financial decisions.

  4. Rewards and Perks: Many credit cards offer rewards, such as cashback or travel miles. This is helpful if someone is looking to earn rewards on their purchases.

  5. Emergencies: Credit cards can act as a safety net in case of emergencies. It allows individuals to make purchases even of they do not have cash with them.

Disadvantages:

  1. Overspending: The ease of use and convenience of credit and debit cards can make it easy for individuals to overspend.

  2. Credit Card Debt: Credit cards can lead to high-interest debt if not used responsibly, which can be difficult to manage and pay off.

  3. Fees: Credit and debit cards can come with various fees that can add up and negatively impact an individual’s finances. The fees such as annual fees, late payment fees, and foreign transaction fees, which

  4. Identity Theft: Credit and debit cards can be vulnerable to identity theft.

  5. Temptation: Credit and debit cards can make it easier to make impulse purchases, which can lead to overspending and exceeding a budget.

How Credit Cards Make it Easier to Spend

Credit cards make it easier to spend in a few ways:

  1. Convenience: Credit cards allow you to make purchases without carrying cash. In this way it makes it easier to overspend because you don’t see the physical exchange of money.

  2. Credit Limit: Credit Cards make it easier to overspend because you may feel like you have more money to spend than you actually do.

  3. Rewards and Perks: Many credit cards offer rewards, such as cashback or travel miles, which can be tempting to use to earn rewards.

  4. Delayed Payment: You can make a purchase now and pay for it later. And thus it make it easy to overspend because the cost of the purchase isn’t immediately felt.

  5. Online Shopping: With the rise of e-commerce, it is easier than ever to make impulse purchases with a credit card.

It is important to be know these factors and to use credit cards in order to avoid overspending.

What Happens When You Start Using Cash as opposed to credit or debit cards

When you start using cash instead of credit or debit cards, there are a few things that can happen:

  1. It increasees awareness of spending. When you use cash, you can physically see the money leaving your hand. This makes it easier to be aware of how much you are spending. This can help you stay within a budget and make more mindful spending decisions.

  2. It helps in less impulse spending. This is because you have to physically hand over the money, which can make you think twice before buying something.

  3. It helps in better budgeting . When you use cash, you can physically divide your money into different envelopes or jars for different expenses. This can make it easier to stick to a budget and see where your money is going.

  4. It helps in lowering credit card debt. As you can only spend what you have, rather than what your credit limit allows.

  5. No Interest or Fees: Using cash eliminates the risk of accruing interest or fees associated with credit or debit card usage.

It is important to note that using cash exclusively may not be practical or safe for everyone. Cash also does not eliminate budgeting and financial responsibility, it just changes the way you manage it.

Alternatives to Debit and Credit Cards for Better Money Management

  1. Budgeting apps: There are many budgeting apps available that can help you track your spending, set budgets, and see where your money is going.

  2. Cash envelopes: The cash envelope system involves dividing your cash into different envelopes for different expenses. This can help you stick to a budget and see where your money is going.

  3. Prepaid debit cards: Prepaid debit cards work like regular debit cards, but you load them with a certain amount of money in advance. This can help you avoid overspending, as you can only spend what you have loaded onto the card.

  4. Digital wallets: Digital wallets, such as Apple Pay and Google Wallet, allow you to make purchases using your phone or smartwatch. This can help you avoid impulse purchases, as you have to physically unlock your phone or smartwatch to make a purchase.

Faqs on Why Cash is better than Credit Cards and Debit Cards for managing budget

Q: How does using cash help with budgeting?

A: Using cash it makes it easier to physically see the money leaving your hand. This makes it easier to be aware of how much you are spending. This can help you stay within a budget and make more mindful spending decisions.

Q: Can using cash eliminate the risk of overspending?

A: Using cash can help reduce the risk of overspending because it makes it more difficult to make impulse purchases. When you have to physically hand over cash, it can make you think twice before buying something. Additionally, when you use cash, you can only spend what you have, rather than what your credit limit allows.

Q: Are there any downsides to using cash instead of credit or debit cards?

A: One downside to using cash is that it can be less secure than using credit or debit cards. Cash can be lost or stolen, whereas credit and debit cards can be cancelled or replaced if lost or stolen.

Q: How can I use cash to manage my budget while still being able to use credit and debit cards?

A: One way to use cash to manage your budget while still being able to use credit and debit cards is by using cash for everyday expenses. And reserving credit and debit cards for larger purchases or emergencies. Additionally, you can use budgeting apps, cash envelopes, or automatic savings apps to track your spending and set budgets.

Q: Can using cash help me avoid credit card debt?

A: Yes, using cash can help you avoid credit card debt because you can only spend what you have, rather than what your credit limit allows. This can help you avoid accumulating credit card debt by only making purchases that you can afford.

Q: Will using cash help me save money?

A: Using cash can help you save money because it makes it easier to stick to a budget. When you use cash, you can physically divide your money into different envelopes or jars for different expenses (rent, grocery, etc.). This can make it easier to see where your money is going and stick to a budget.

Q: Can using cash help me make better spending decisions?

A: Yes, using cash can help you make better spending decisions because it makes it easier to be aware of how much you are spending. When you use cash, you can physically see the money leaving your hand. This makes it easier to be aware of how much you are spending and make more mindful spending decisions.

Q: Is using cash more time-consuming than using credit or debit cards?

A: Yes, because it requires physically counting and handling cash, and making sure you have enough cash on hand to make a purchase. However, it can also be a good way to slow down your spending and make more thoughtful decisions.

Debit and credit cards can be a convenient and secure way to make purchases. If not used carefully, they can also lead to budget mistakes. We have to be mindful whether we are using Credit or Debit cards or even cash. If we are responsible we can avoid financial troubles and stay within our budget.

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