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It wasn’t so long ago that living cash-only was the only option. But now, many options exist to pay for your needs and wants. Some argue that these options have made it easier for people to acquire unnecessary debt, but living cash-only has its own set of pros and cons. See what they are so you can compare them and make the right decisions for your lifestyle.

Pros of a Cash-Only Lifestyle

Cash-only living isn’t just about ditching credit cards. It can mean that you only pay with paper currency or your debit card. This means you’re using money that doesn’t have to be paid back, unlike credit cards or loans. Using only money that is readily available has advantages.

No Worries About Fees or Extra Expenses

When you pay only in cash or from what’s available in your bank account, you don’t have to worry about any fees that may be tacked on from using a credit card or taking out a loan. These can include monthly and overdraft fees or interest charges. Dave Ramsey, author of “The Total Money Makeover,” calls these “gotcha” fees and advises that people can reduce their spending and debt by avoiding them.

Money Management Skills Increase

Whether you only use cash or you use a debit card attached to a checking account, you’re likely to increase your money management skills by always knowing how much money you have available. Since there’s no backup method for emergencies, you learn how to save money for unexpected circumstances and are more apt to only spend what you have to spare. Having a $500 emergency fund can ease the financial burden when things pop up, such as when your car breaks down or your refrigerator dies.

You Can Avoid Debt

Sean McQuay, Nerdwallet’s Credit and Banking Expert, says, “Taking on debt to cover the gap between income and expenses is a short-term fix with costly long-term results.” Nerdwallet reports that it costs the average American household about $1,300 annually just to carry credit card debt. Living cash-only can help you avoid debt because it forces you to weigh your spending choices. If you don’t have the money to spend, you can’t spend it.

Cons of Cash

There’s always another side to the story, and cash-only has one, too. Keep these points in mind before going strictly cash-only.

If You Lose Your Cash, It’s Gone

Carrying around cash for everyday expenses may not be a big deal, but almost everyone has bills to pay. Some of your big-ticket bills may include:

  • Mortgage or rent
  • Car payments
  • Utility bills
  • Insurance

You’ll probably be withdrawing a lot of cash and carrying it with you to send off on payment day. Keep in mind that cash doesn’t have a digital footprint. Once it’s gone, it’s gone and there’s no way to track where it went. If you accidentally lose your cash or because someone takes it from your wallet or purse, that money is gone and no longer available to pay big bills or anything else.

E-Commerce Sites Don’t Always Take Cash

People can find great deals online, but paying in cash isn’t usually an option. When you choose to go cash-only, you’re limited to shopping the deals you can find locally or those you’re willing to travel to take advantage of. But any extra travel may negate the savings because you’ll be paying for other expenses like gas just to get there. However, many sites will allow you to use a debit card and withdraw the money directly from your checking account.

You Can’t Make Reservations With Cash

It’s beneficial to make reservations for modes of travel to ensure you reach your destination. You may also want to make reservations for your accommodations so you’ll have somewhere to stay once you get there. But when you live cash-only, you can’t make reservations because reservations require a hold on your credit card. Even if you use a debit card, you’ll have to make sure the funds are available because the hold may be there a while.

You Miss Out on Cash-Back Opportunities

Many credit card companies offer incentives to earn cash back when you use your credit card. The percentages vary, but some offer as much as 3% cash back. Others may offer other incentives such as frequent flyer miles or discounts for products and services. Not having a credit card means you miss out on these opportunities and the money associated with them.

Cash Doesn’t Build Credit Scores

Using cash and avoiding all forms of credit could make your credit score suffer, and ignoring your credit score could mean trouble. Credit scores aren’t just used to determine your credit eligibility for car loans, mortgages, other loans and luxury items. Employers may also look at your credit score to determine if you make sound decisions, manage money well and will be a good fit for the company. When you only use cash, your financial savvy won’t be reflected in your credit score, and that could cost you a job.

Tips for Choosing How to Pay

Deciding to go cash-only is a big decision. Much of that decision will rely upon your needs, goals and financial comfort levels. These tips can make the choice a little easier.

  • Determine your immediate financial needs
  • Set short- and long-term financial goals
  • Know your own limitations and set yourself up for success
  • Weigh your options and go with what fits now and with your future

Life is a balance and so are your financial decisions. Do you live a credit card-only or cash-only lifestyle? Let us know why in the comments below!

This Post Has 17 Comments

  1. Hi Kevin.
    We were in debt with student loans, car loans and credit cards. Once you get sucked into enough cc debt that you will never be able to pay them off it’s truly frightening. We were living paycheck to paycheck. A lot of our debt was for medical issues. We finally had to declare Bankruptcy (Ch 13) an extremely emotional time for us. This was in 2008. Since then we got rid of (closed out) all our credit cards. Saved an emergency fund and have not gone into any debt since then. We use cash and our debit cards for every thing. Even a long over due vacation to Kauai in 2018 after a 17 year period of no vacations. We found out that you can use Manual Underwriting for a house loan. We also found ********* which is a financial service which does not use the credit rating system. They look at your history of payments : Rent, Mortgage, Utility Bills etc… Legally banks have to deal with them. You do not need a credit rating to buy a house or car. You should be able to save enough to actually just buy a car. You don’t have to have a brand new car. There are good used cars just as good as new. You also can drive your own car a lot longer than most want to. One of our cars is a 1997 with 468,000 miles on it. It has been a great car and we maintain it for much less than another new car/payments. We make saving a priority and when the inevitable repair or replacement comes up we have been able to use cash (Refrigerator, dishwasher, water heater). It’s a wonderful feeling only having debt on our house. My husband recently had a 20% reduction in his salary because of Covid. We are sticking to our no debt and savings (less than we want). And we know it will be tough but are committed to NO CREDIT CARDS.

  2. Hey Kevin. We have a SWA Rapid Rewards credit card through Chase. We use the card to pay as much as we can and then pay the bill in full every month period, no excuses. I keep track of the spending so we aren’t caught off guard. The rewards of using the credit card is a Companion Pass valid until Dec 31! We have enough points from day to day purchases for me to fly free, then hubby flies free with the Companion Pass. Sweet and is only costing $99 a year for the annual fee. I will pay the $99 in exchange for the multiple free flights we end up taking every year. Last year we had enough SWA points (and the Companion Pass) for EIGHT of us to fly free to Orlando for a week long Disney World trip. 🙂 Won’t be changing anything about how we handle our finances any time soon!

  3. Some of your cash-only suggestions are good but others are flawed. Most Americans are stuck in a credit card web of debt which is encouraged by almost every company that sells anything. “You deserve it.” “Why wait.” “Only ‘$169.00 per month” (with no mention of the total cost of the purchase or the fact that interest will push up that price exponentially.)
    And the idea that paying cash will not improve your credit score. Phooey. The only thing the credit score does is supposedly give you a better interest rate when you get back to buying with credit cards. I.E. The more you are in debt but making payments regularly, the more merchants are willing to let you buy on credit.
    I try to use my debit card for a lot of cash purchases and this card is accepted in most situations with no interest charges. My credit score is great and I intend to keep saving and putting off a lot of purchases until I can afford them.

    1. Paying cash and paying your bills on time won’t hurt and may help your credit score. The problem you may run into is that you would be waiting a long time to make some purchases like a new car or a house. If you want to get a car or a mortgage loan, they’re going to want to see at least a couple of lines of open credit in the form of something with installment payments or a credit card. You could maybe even get a personal loan. There’s no need to pay credit card interest. You treat it like a debit card and pay the balance in full every month.

  4. For over 35 years my husband and I did the whole debt thing, creating a credit score just a few digits under 800. Boy, are we sorry. We have paid thousands of dollars for the honor. If we had been smarter, and more intentional with our spending, those extra thousands could have been invested. We would be retired now instead of looking at working until we are nearly 70 years old. We have been living on only cash and debit card spending for about 4 years now, and our only regret is that we didn’t make this our lifestyle sooner. By the way, the “Total Money Makeover” is how we changed our financial picture. We are looking forward to a ZERO credit score. Our answer to the question, “What’s in your wallet”, MONEY! You can’t borrow your way to wealth. Pay yourself instead of someone else.

    1. Hi Tammy:

      I’m glad the cash and debit card plan is working out well for you. There’s certainly nothing wrong with it. Just to briefly play devil’s advocate, I think it really depends on your lifestyle. If you want to rent an apartment or a home, you may get by on just cash. However, if you want to buy a new car or get a house, it’s often hard to make that purchase with cash alone. You need credit. What you’re doing is admirable, but it’s not for everyone. It’s awesome to hear that it’s worked well for you.

      Kevin Graham

    2. Tammy you go girl. As a former banker the goal is to keep you in debt. If you get the whole nation to think like you do our national debt would be less, healthcare would be less and our overall mental state would be better . Debt is evil and it causes spiritual , physical, and emotion harm. Get out of debt and put money in your pocket and not the bank.

  5. Having on a couple occasions, being in more minor “plastic debt” than I cared to be, I went back to attempting to run a cash only lifestyle whenever possible. It did, and still does, make the most sense. A few of your “con’s” to the cash only comment are flawed … you did mention debit card’s as being a form of “cash only” (basically, same as writing a check) in the “pro” points, yet mention issues with online purchases, making reservations, and a couple other functions that can’t be done with actual cash … not so! One can tie their debit card (considered cash) to things like PayPal, Android Pay, or direct use which you already indicated as being within the cash option definition. The mention of missing out on “cash back rewards” using cash is usually rather insignificant in that these “rewards” are usually 1 to 2% … not unlike the fact that a conventional savings accounts (these days) only yield an annual interest of about $25 to $30.00 per $10,000 in the account … again, somewhat insignificant especially if the funds saved are even remotely difficult to access without some penalty.
    I would agree that “big dollar” items like a car purchase or a mortgage will require an interest encumbered transaction not likely to be do-able in cash by the most people. However, about everything else can be done via some form of cash only means and, as mentioned, is a great teacher of “Money Management Skills”. Of course, another alternative is to buy good’s and services with credit cards (to keep good credit well established) but only if you can immediately pay off the “charge” with available cash on hand … therein is the advantage in maintaining a high credit score, still receiving the cash back reward’s, and also, never see interest added to a credit card balance if paid within the usual “grace period”. After being plagued for about two (2) years with credit card debt (at a time when interest rates were soaring as high as 24+%), I did manage to finally get “paid up” and, for the past 20+ years have done just fine with my own style of cash only program … still using credit and debit cards and still maintaining a credit score over the 800 mark, even as a retired person on a fixed income within the range of what’s considered the annual “average” or median. Over the past 10 or so years, I was caught up in a divorce and a 55K loss in a property sale but rebounded rather quickly. Even with a perpetual condo mortgage and car payment, together with the usual living expenses, I’ve still been able to enjoy an active social life, pursue hobbies, save a minimal amount of money on a fairly regular basis as well as take a decent vacation occasionally. It’s all about discipline, moderation, well thought out action’s, and general good sense.

    1. Hi D.O.:

      We’ve definitely made the change to the debit card statements. You’re definitely right.

      As someone that routinely uses the credit card rewards programs, I think I get more money back than I would out of my checking account. However, it’s something that could be different for everyone.

      Kevin Graham

  6. Using credit cards wisely allows you to take advantage of all a credit has to offer ie: cash back rewards, making a reservation and online shopping while still getting the benefits of using cash without the downside. The key is not to spend more than you can pay back each month, thus avoiding interest charges and using the credit card company’s money free for 30 to 45 days. That’s what I do and it works beautifully.

    1. Hi Carol:

      Thanks for sharing! I typically treat my credit card as if it were a debit card and pay the whole thing off every month to get those sweet rewards.

      Kevin Graham

  7. It is good to see a mortgage and loan company talk about the the positives of using cash only. However some of the cons you represented of using cash only are not necessarily true. You can purchase items online using a debit card. And if you are cash only then you have no need for a credit score to gain a small loan in your name. Lastly if you have a debit card you don’t need to walk around with lots of cash in your wallet. A debit card comes with the same security as a credit card. If you lose your debit card you call the bank and cancel it and they will issue a new one, plus they will refund your money if you have been hacked.

    1. Hi Ryan:

      You’re definitely right about the debit card and we’ve made an update.

      It may be possible to get a loan without credit. However, the terms probably wouldn’t be very favorable for the borrower.

      Kevin Graham

  8. I received an email saying to win a $4000 dream vacation I just need to click on the link. Well I’ve clicked on every link in sight and no where can I find one to show how to sign up for that $4000 dream vacation. Was there an expiration date that has now passed? I received the email on April 13, just days ago. So I’m pretty sure I haven’t gone pass any expiration date.

    If someone could tell me where I would really like to enter to win so I can take a really nice vacation.


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