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NCN wrote recently about How to Break the Credit Card Habit, and he said something I thought was really interesting:

“I’ve heard it a thousand times — ‘If I have cash in my pocket, I’ll just spend it.’ That might be true, if you still have your credit card to fall back on. On the other hand, if you knew, and I mean knew, that the cash in your pocket was all that you had, I’ll be that you could learn to manage it.”

My first thought was, wow, he’s right. Cash normally runs through my hands like water, but if I only had $10 in my pocket, and it was my last $10, of course I wouldn’t blow it on lunch out or some snacks. I’d probably buy some eggs, a loaf of bread, and a stack of Top Ramen instead to get enough food for a week or two of minimal meals.

I use credit cards all the time now. For a while I didn’t use them at all (relying instead on checks and my debit card) because I never wanted to owe money on them again. In other words, I didn’t trust myself to use them responsibly.

Cash still runs through my hands like water, but I pay off my credit cards in full each month. (And sometimes within hours of making a purchase.) I only started (reluctantly!) using credit cards again after a big problem with my debit card.

What’s changed?

It’s not HOW I’m paying for things. It’s how I FEEL when I’m paying for things. In other words, it’s my attitude and my rediscovered ability to exercise self-control.

That’s what’s important. Personally, I think people should do what’s right for them. Although hard-core “you spend more when you use credit” people probably won’t believe me, I don’t spend more when I use credit.

For me, using a credit card is the painful thing. It HURTS. Every time I go to pay for something with my credit card, I remember how painful owing money on those things was. I remember that I’m never going to be there again. And, I get to experience the pain of spending the money not just once like when I hand over cash, but four times. (Once when I make the purchase, once when I enter it into Quicken, once when I write it in my spreadsheet, and once when I transfer the money to my credit card account.)

For many people, cash is the painful thing, and that works for them. Others probably have never had a problem with self-control in that area, and so it doesn’t matter which they use. They are already always thoughtful about their money choices.

I could be just as thoughtful about cash as I am about credit. It’s a mind trick or a way of viewing things. But I have chosen to view cash as blow money that doesn’t need to be accounted for except in a general way. As a result, I hardly ever carry cash, because I don’t like to blow money. I never really realized til now that I was actually just doing some mental gymnastics.

However you get there, it’s thinking about your spending and making sure it’s working for you and getting the results you want that matters.

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