I did an experiment some time back, of using cash to pay for groceries versus using credit card to pay for groceries, as way to be more “disciplined” about how I was spending money on groceries.
After a month I went back to using credit card.
Cash was more inconvenient and then I had a lot of loose change to carry around, then I had to manage the conversion of all that change into more convenient forms (like using Coinstar, which is a machine in the U.S. that converts all your loose change into a store “credit” — minus a transaction fee of course).
I think the cash v. credit card debate is useful only for those who need to leverage “pain of payment” as part of developing specific financial habits.
This is also cultural as a financial habit. I’m speaking from a U.S. perspective – our society is in love with credit cards no matter how much trouble this has caused many consumers. We are definitely vulnerable to the lure of distancing ourselves from the pain of payment.
However, for some consumers like me, who pay off entire credit card balance each month and carry only 1 or 2 cards (the only reason I have an American Express card is for purchasing gas from Costco – if they start accepting Visa I’d be down to 1 card) – credit cards represent a portable and convenient form of money that also gives me a needed “paper trail” since I’m not interested in saving every single receipt from a transaction.
I’ve also run into cases where I paid cash, only to have the service provider send me an invoice because they didn’t have a record of that cash payment, and I can no longer find the hand-written “cash receipt” that was generated by the administrator at the time of payment.
The first question I was asked was, “Did you pay by credit card?” because this would allow us to query the credit card company or for me to look into past statements for evidence of payment.
That said, I do use methods of “pain of payment” such as immediate notification of the purchase item via email as well as additional notification when the account balance reaches above a certain limit, thus even if I’m 1 step removed from cash payment, I’m still reminded of the actual balance I’m working with.