In a recent column for ABC News, David McPherson noted that he has taken a different approach when it comes to making smaller purchases, one that may help consumers trying to concentrate on savings. Rather than pull out a card for everyday purchases, McPherson has suggested the use of cash only.
“My belief is that relying on cash in the wallet rather than plastic instills greater budget discipline and reduces impulse purchases,” McPherson said. “By relying only on the 10s, 20s and maybe even 50s in your wallet, you buy only what you really need rather than what you think you need or want.”
When it comes to credit cards, it may be easy to see why consumers would avoid the use of plastic and opt for cash instead. Along with companies increasing interest rates, many consumers have been plagued by fees and dropping credit scores. However, there are laws in place set to take effect in February that could help some consumers regarding changes to their credit card debt accounts.
Debit cards may be another matter, but they do come with their own downsides. Like credit cards, debit cards offer a certain amount of convenience, which may cause consumers to spend more of their money.
Furthermore, some accounts come with a program known as overdraft protection, which could charge consumers for spending more than is on their account. Recently, actions were taking by the Federal Reserve to require that financial institutions get their customer’s permission before enrolling them in these programs.
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