In Debt? Consider Paying Cash for Your Purchases

by Mike on May 3, 2012

Credit Card

Are you in debt (besides the mortgage)? Do you have thousands of dollars worth of student loan debt and/or credit card debt? If you are struggling to make your payments, one of the best things you can do is to stop using credit and begin to use cash.

I know, I know, in today’s world, who uses cash? If you use cash, you have to actually walk into the gas station to pay for your gas rather than just swiping your card at the pump. More importantly, you have to remember to actually carry cash. After years of using credit cards to pay for all of your purchases, it may be difficult to remember to bring cash when you leave the house.

While there are certainly inconveniences to using cash for all of your purchases, the rewards will be great.

Let’s be honest; many people who have credit card debt will have it for the majority of their lives. They will continue to use their cards each month, paying off only what they charged that month, or worse, only the minimum payment they have to make. There is no end in sight.

However, if you quit using the cards, get back in touch with your spending patterns by using cash and only buying what you can afford, you will be in a better position to pay off your debts more quickly.

Let’s say you currently owe $12,000 on a credit card at 11.99% interest. If you only make the minimum balance on the credit card (2% of the balance), you will be debt free in 25 years, 11 months! If, instead, you take this month’s minimum payment of $240 and pay that same amount every month, you will be credit card debt free in 5 years and 9 months. If you can ramp up your payment and pay $60 more a month, making a payment of $300 each month, you will be credit card debt free in 4 years 3 months.

Yes, extra payments help you pay off the credit card faster, but even if you do nothing more than make the same payment your are making now and quit adding any new credit card charges, you will be credit card debt free in less than six years.

You will be off the endless credit cycle.

If you find using cash to be too difficult in some situations, consider using a debit card when you need to reserve a hotel room or pay for a purchase online. However, learning to not spend more than you make is vital. Not incurring new debt as well as making the same payment you are making now for the life of the loan will get you out of debt. Even if you do nothing more than that, you will be debt free in a few years. Isn’t it worth it to revert to cash for awhile until you no longer owe? Think of the financial freedom you will have.

I will be inconvenienced by using cash any day if it means I will one day no longer be inconvenienced by debt and limited cash flow.

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{ 6 comments… read them below or add one }

1 Hareiana September 8, 2012 at 4:00 am

Out Of The Dark (OOTD) Budgeting offers a very effective tool for managing the paying off of credit card debts and while you are at it you will likely also pick up a good budgeting habit, and it’s all free.

2 "Tom" May 23, 2012 at 4:54 am

Obviously. When you are dipped in debt crisis, you just can’t go on using credit cards for paying your bills. It will be like digging self grave. Personally I prefer using debit card and cashes even if I am not going through debt problem. According to me cashes and debit cards any day can be a better preference in compare to credit cards, because somehow or other you are bound to cross the credit limit that’s been denoted, something that’s totally uncalled for. Using credit card for each and every single purchasing is simply a bad habit that brings in problem in the long run.

3 Sean @ One Smart Dollar May 11, 2012 at 2:31 pm

Completely agree. If you get yourself into a whole with credit the only way to begin the reversal process is to eliminate credit and just pay cash.

4 Guillermo May 7, 2012 at 6:21 pm

Excellent recommendation, all that you say is true, In my case i have a debt as a result of bad use of my credit card and the best solution that i found was pay in cash all my expenses and gradually pay debt, thanks for this article.

5 TB at BlueCollarWorkman May 4, 2012 at 9:52 am

I think paying cash is a great idea for people who have serious credit card problems — which is a lot of people of course. But cards offer cash back and if you use them truly how they’re supposed to be used and pay off your debt every month, then it’s all good. I think, anyway!

6 John | Married (with Debt) May 3, 2012 at 3:41 pm

Switching to cash only is a great way to get ahead of your finances, rather than always being behind and waiting for the bill. Great tips!

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