Financial Planning Tips: The Pros and Cons of the Cash-Only Spending Method (Part 1 of 2)

Learn about cash-only spending methods to consider as part of your financial planning strategy

Financial Planning TipsWhether you are working with a financial planner or are going at it alone, it is important to create a plan for saving, spending, and budgeting your money in order to meet both your short-term and long-term financial planning needs and goals. When it comes to spending and saving your money wisely, it is not only about what things you choose to spend your money on but also about how you choose to pay for such things. These days, there are so many options for making purchases and payments—cash, debit card, credit card, check, PayPal, and etc.—that it can be challenging to know the best payment method to use for various types of purchases. Do you use paper (cash) or plastic (debit or credit card)? Do you know the pros and cons of your payment method of choice? Are you selecting your payment method in a strategic manner?

Here on the Summit Brokerage Blog, we previously discussed the financial planning topic of when credit cards may be the best option (click here to read the blog) and when debit cards may be the best option (click here to read the blog). So what about good ol’ paper cash? Are there any strategic advantages to using cash instead of a debit card or credit card? Many people are familiar with the personal finance and budgeting concept that if you pay with cash (as opposed to a debit or credit card) you will spend less money. Is this true? Well, the answer is: it depends. If you’re thinking about switching to a cash-only spending method, here are some pros and cons to keep in mind. We will discuss the pros to the cash-only spending method in this instant blog and then we’ll discuss the cons in the soon-to-be-published part two of this blog topic.

Potential Pros to Paying with Cash

Potentially spend less money

Some financial planning studies have shown that consumers spend less money when they actually have to hand over physical, cold hard cash as opposed to a quick, thoughtless little swipe of a debit or credit card. To some consumers, physical cash feels like real money that they have to immediately part with to make a purchase as opposed to plastic money where you can swipe now and pay later. As Elle Kaplan, CEO and founding partner of LexION Capital Management says, “When you have the tangible money in your hand and you can physically feel it depleting each time you spend, you are much more likely to notice what you are buying and be careful about it, rather than if you just have the ease of swiping a card.”[1] Kaplan suggests: “A cash-only diet to clients who need to rein in their spending. They might withdraw $100 from an ATM on Sunday, and try to stretch that money over the week. The mindless $20 purchases stop pretty fast,” she says. “Once you spend that $100, you’re done.” [2]

No interest charges

When you pay the full amount of a purchase in cash, a huge advantage is that you won’t accrue any costly interest charges. On the other hand, if you use a credit card to make a purchase and are not paying your monthly credit card balance in full each and every month, you’ll typically pay between 10 and 25 percent in interest charges on top of the initial purchase price of the item you bought.[3]

More privacy/less marketing and retailer spam

When you swipe with a credit or debit card at a retailer, many retailers often ask you for additional information such as your zip code, mailing address, and email address so they can send you targeted marketing. This effects your privacy (do you really want a retailer to have detailed information about each and every product you buy from them?) and can overflow you email inbox and physical mailbox with marketing materials. Sure, you may get a useful coupon once in a while, but these coupons can usually be independently sourced by checking online coupon website.


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About Summit Brokerage Services, Inc.

Summit Brokerage Services is part of Cetera Financial Group. Summit Brokerage provides a broad range of securities brokerage and investment services to primarily individual investors. Summit Brokerage also sells insurance products, predominantly fixed and variable annuities and life insurance through its subsidiary, SBS Insurance Agency of Florida. Summit Brokerage also provides asset management services through its investment advisor, Summit Financial Group, Inc.


About Cetera Financial Group

Cetera Financial Group® (“Cetera”) is a leading network of independent retail broker-dealers empowering the delivery of objective financial planning advice to individuals, families and company retirement plans across the country through trusted financial advisors and financial institutions.  Cetera is the second-largest independent financial advisor network in the nation by number of advisors, as well as a leading provider of retail services to the investment programs of banks and credit unions.

Through its multiple distinct firms, Cetera offers independent and institutions-based advisors the benefits of a large, established broker-dealer and registered investment adviser, while serving advisors and institutions in a way that is customized to their needs and aspirations.  Independent financial advisor support resources offered through Cetera include award-winning wealth management and financial planning and advisory platforms, comprehensive broker-dealer and registered investment adviser services, practice management support and innovative technology.  For more information, visit


*”Cetera Financial Group” refers to the network of retail independent broker-dealers encompassing, among others, Cetera Advisors, Cetera Advisor Networks, Cetera Financial Institutions, Cetera Financial Specialists, First Allied Securities, Girard Securities, and Summit Brokerage Services.


All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.


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