A Month Without Credit Cards: The Recap

photo: paalia 

On April 1, BargainBabe.com blogger Julia Scott gave up her credit cards for one month. The goal of her experiment: find out whether using cash only will get her to spend less. After a surprisingly spend-happy first week (she exceeded her weekly budget by more than 60%!),a belt-tightening Week 2 and a reflective Week 3, Julia recently wrapped up her month-long experiment. Here, she lays out the gritty details.

Call me a statistic. During my no-credit experiment last month I did just what studies comparing cash and credit card spending have shown: I spent less with cash. A lot less. But I’m not about to give up plastic. Here’s why:

Credit cards are almost essential for major purchases, unless you want the cashier to give you a look that says, “You are so in the mob,” while counting out $500 in twenties. Credit cards are required for many online buys and to guarantee rentals. If you want to buy a meal or drink in-flight, no wad of bills will grease your throat.

That said, I plan to leave my credit card at home on a regular basis unless I have a pre-planned purchase to make. I can see purchases that require a credit card a mile away, so carrying around a bottomless pit of money is just tempting myself. Plus, credit card perks — my main reason for using plastic — do not add up that quickly. I earned an average of $16 in cash-back credit card rewards per month this year, but on a cash diet I spent $200 less. That’s an awfully big perk!

So what did I spend my money on this month?

A number of seemingly random items sucked up my dollars – like bike repairs and gear in preparation for the Wildflower triathlon on May 1. I say “seemingly random” because unusual expenses like these pop up every month without fail. This is the main reason I created a forward-thinking budgeting system, which you can download from my blog http://www.bargainbabe.com/2010/04/20/why-my-budget-gives-me-1200-a-month-to-spend/.

My totals for each spending category include tax.

Groceries: $172.22

Meals out, including coffee: $21.12

Drugstore items: $43.10

Bicycling gear and repairs: $169.38, including $100 to ship bike across the country and back

Business supplies: $15.86

Ski trip: $95

House and garden: $45.52

Gas: $41.57

Camping: $40

TOTAL accounted-for spending for April: $643.77

TOTAL ATM withdrawals: $1,000

Cash left in my pocket: $11

Total unaccounted spending: $345.23

Total rebates and gift cards earned: $29.69

Percent unaccounted-for spending: 35%!

See that last statistic? A whopping 35% of my dollars disappeared in April with no trace, which is why I’m not calling the experiment a complete success. Without these receipts (cashiers forget to offer them and I forget to ask) the picture of my spending provided above is woefully incomplete. This also explains why some of my category totals — like meals out — seem low.

Adjusting to cash

Using cash for every purchase requires an adjustment period. The first week of my credit card ban I spent like a rich woman, buying people drinks, eating out more often, and splurging while on a snowboarding vacation. The second week I overcompensated, spending only $40 for groceries. During my third and fourth weeks I made careful decisions and planned ahead so I could stick to my target spending goal for the month. Overall, I spent 16.7% less than my average for the past three months.

I decided to tap into my savings to cover a freak mattress purchase that added up to $533. Thankfully, I had the savings to do it: otherwise I would have completely blown my budget for the month. Eating rice and beans gets dull quickly.

Looking ahead

Going forward I plan to use cash for all my purchases that are less than $50, which covers the majority of my purchases. If you are considering using cash 100% of the time I recommend you:

Get in the habit of always asking for a receipt. Many cashiers don’t offer then for small purchases.

Realize that cash is messier than credit. Bills get crunched and mixed up and take up a lot more room than your sleek card.

Don’t stress about taking a few extra seconds to count out exact change. You are not any slower than a person who swipes and signs.

Probably don’t need to carry about more than $50 at any given time. This means you are not in danger of losing a huge amount of money.

Save your receipts. So you can see where your money went by category.

Only carry your credit card when you have specific plans to use it. Otherwise you are just tempting yourself.

Julia Scott blogs about saving money on everyday expenses like groceries, gasoline, and gifts at BargainBabe.com.