Cash on Hand: How the Way You Carry Money Can Affect Your Spending

Cash on Hand: How the Way You Carry Money Can Affect Your Spending
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    It's rare to put much thought into how you carry your money and its implication on your spending habits.

    You might go shopping for a nice wallet that looks stylish or a money clip to save space in your pockets, but you probably wouldn't think that would affect how you spend your money.


The way you carry your money and the payment method you choose actually has a significant effect on your spending, though. Here’s how your spending can change based on what you take with you when you’re shopping.

You Spend Less with Cash Than with Credit Cards

The most significant difference in how you spend comes down to whether you pay for purchases with cash or a credit card. People who pay for purchases in cash tend to spend less per purchase than people who pay with their credit cards or debit cards.

Why would it matter how you choose to pay? When you’re handing over cash for a purchase, it feels more real than when you’re swiping or inserting a card. It’s a different feeling psychologically, and you don’t value the money as much when you’re spending it with a card.

Bill Size Often Determines How You Spend It

When it comes to paying in cash, the size of the bill will have a significant impact on how you spend it. People tend to reserve larger bills for lump sum purchases and smaller bills for smaller expenses. This means that you’re less likely to make a purchase if you have larger bills on you, but if you do make a purchase, you’ll probably spend more than you would if you were carrying smaller bills.

There’s a tendency to value larger bills more than smaller ones, which is why those in the service industry will often bring you change in $1 bills, knowing you’ll be more willing to part with them when you leave a tip.

Money Clips Make You More Likely to Pay Cash

If you don’t have any real payment preferences, you’ll default to whatever is most convenient for you at the time. And what is most convenient depends in large part on how you’re carrying your money around.

Your typical wallet puts credit cards front and center with the cash in a pocket behind them. This remains true even with minimalist wallets, although to a lesser extent. Therefore, you’ll be more likely to default to credit cards with a wallet. With a money clip, on the other hand, your cash is front and center, meaning you’re more likely to pay with that.

Credit Cards Can Provide the Best Value

Even though credit cards can cause you to spend more, if you can avoid that temptation, credit cards are a much better way to pay for purchases. That’s because they’re the one payment method that gives you the opportunity to earn money back on your spending.

With cashback cards, you can earn money back on each purchase. With a rewards card, you can earn either reward points or airline miles for your purchases, and later redeem them for travel rewards. The standard rate is 1-percent cashback or 1 point/mile per dollar spent, which isn’t much, but it adds up when you use your credit card enough.

It’s interesting to look at how your choices regarding money carrying can affect your spending. Just remember that it’s ultimately your decision how you spend. Even though credit cards can cause higher spending, they also have their benefits. Focus on finding whatever works best for you and helps you maintain responsible spending habits.

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Categories: Money Management