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Cash Amnesia

gsb.stanford.edu

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Re: Cash Amnesia

#61

Post by davchana »

malfist wrote: post #2

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

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.

Re: Cash Amnesia

#62

Post by electroly »

wussboy wrote: post #29
malfist wrote: post #2

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

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...

Re: Cash Amnesia

#63

Post by cube2222 »

TheRealPomax wrote: post #24
hunter2_ wrote: post #18

> “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 har…

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 ran…

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.

Re: Cash Amnesia

#64

Post by electroly »

brightball wrote: post #35
electroly wrote: post #4

Earlier quoted context omitted.

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 transacti…

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 t…

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.

Re: Cash Amnesia

#65

Post by croutonwagon »

TheRealPomax wrote: post #24
hunter2_ wrote: post #18

> “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 har…

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 ran…

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.

Re: Cash Amnesia

#66

Post by croutonwagon »

claytonjy wrote: post #54
inconceivable wrote: post #42

Earlier quoted context omitted.

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…

Is your ATM card not also a debit card? Mine have always been both.

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.

Re: Cash Amnesia

#67

Post by CalRobert »

rob74 wrote: post #16
CalRobert wrote: post #10

Earlier quoted context omitted.

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.

Re: Cash Amnesia

#68

Post by WirelessGigabit »

chrismcb wrote: post #59
EGreg wrote: post #15

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.

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.

Re: Cash Amnesia

#69

Post by TheRealPomax »

croutonwagon wrote: post #65
TheRealPomax wrote: post #24

Earlier quoted context omitted.

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 ran…

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…

Yes, with a debit card in North America that is certainly true. Because banks are shit here.

Re: Cash Amnesia

#70

Post by TheRealPomax »

ImPostingOnHN wrote: post #25
TheRealPomax wrote: post #24

Earlier quoted context omitted.

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 ran…

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.
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