With cash purchases becoming less and less frequent thanks to the ubiquity of debit and credit cards, the practice of monitoring daily spending habits has become an increasingly important topic for many.
Due to this shift from cash to cards, it can be hard to consciously keep track of how much you are spending. With cash, you are limited by the money you have on hand at any particular time; however, with a card, access to the entirety of your bank account or credit line is essentially unlimited. In some cases, that total can be thousands of dollars; and with a credit card in particular, there is no immediate penalty for spending more money than you originally intended.
There is an additional psychological factor – referred to as “coupling” – involved. Coupling theory is the idea that certain behaviors are linked to a specific context. When someone initiates a transaction and uses cash as a method of payment, there is give and take between the customer and the merchant: The customer gives the merchant cash and, in exchange, the merchant provides goods or services. Because the customer had to physically hand over their money, the effects of the purchase are felt immediately. Alternatively, when using a credit or debit card, the transaction appears more positive to our hardwired brains. In order to make a purchase using a card, you simply swipe or insert the chip into the device on the counter and the transaction is complete. In this case, the normal interaction associated with the transaction did not occur. There was no give and take. When it was all said and done, you took your card back and gave no physical item to complete the transaction. I’m not saying you were unaware that you made the payment, but the transaction had less of an impact and less effort required compared to a cash transaction.
Let me give you another example: opening a new bag of family-size potato chips. In this hypothetical scenario, there are two options: You can eat chips directly out of the bag or you can pour your desired portion into a bowl. I think you can see where I am going here. If you eat directly out of the bag, it’s difficult to tell how much you’ve eaten until the bag is empty (just speaking for myself!). If you try to measure out your portion sizes by eating out of a bowl instead of the bag, you are less likely to finish the entire bag. In many ways, eating chips directly out of the bag is similar to using a credit or debit card; while putting chips in a bowl and then eating them is similar to paying with cash.
I am guilty of this on both fronts – money and potato chips. I used to try to use cash for all of my day-to-day purchases, but now with COVID-19 and the increasing popularity of online shopping, it’s become a difficult habit to maintain. Now, I use my debit card for personal purchases and my credit card for small subscriptions (Hulu) and gas. However, I try to check my banking and credit card account balances daily. I might miss a day or two, but by checking the balances frequently, I am not surprised by how much I spent or by the balances of my accounts because the transactions are fresh in my memory. This is certainly not a fail-safe method, but it is a happy medium between always trying to have enough cash on hand and neglecting to check your account balances at all. I’m not trying to live a perfect life; I’m trying to live a better life.
Brent Schafer
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