Cash vs. Card: when do you spend more?

Conventional wisdom says that we spend more money on cards because it doesn't feel like we're actually spending. But in the age of virtual currency, PayPal and online shopping, is buying in cash still the best way to cut our outgoings?

Cold hard cash

Most people agree that having instant access to credit makes spending easier, even (or perhaps especially) if you don't actually have the cash to spend. This stance is backed up by psychologists like Dr. Julian Ford, who argues that shopping, and particularly impulse buying, is made easier by credit cards, which, he says, "invite you (sometimes it literally feels like they call you) to make more purchases than your paycheck can cover."

The interesting thing is that Dr. Ford speaks from the viewpoint of someone who makes impulse purchases, and argues that credit cards make it easier to indulge in destructive spending habits - this isn't the same as saying that credit cards make everyone spend more.

The enigma of online shopping

Online shopping is the easiest way to rack up credit card spending - shops encourage you to store details and order items in a single click. And yet a LivePerson study found that 61% of people spend more in-store than online, while a further 27% were more likely to give in to impulse purchases at a physical checkout.

This is explained by the fact that online shopping seems to encourage some valuable habits in countering impulse purchases. Things like allowing time for us to objectively research the best offers, check whether we really need the items, and pause for thought once the item is in our basket. There are also a number of online tools that can be viewed alongside your online shopping window. Keeping our free Money Dashboard budgeting software open in a separate tab while you shop can give you the financial knowledge you need to make those crucial spending decisions.

What's more, the BBC found that while splashing out is often seen as a thrill, buying online lacks the instant gratification of an in-store purchase. With this in mind, it seems that cash could be the true source of 21st Century overspending.

New dangers

Of course, certain card providers and advertisers are watching these trends and developing new tools to increase their earnings.

Mobiles and tablets are bringing online shopping in-store, eliminating that time you need to take stock, do your research, and cool off before purchasing. As a result, studies show that these devices have boosted impulse purchasing by £1.1 billion per year in the UK alone.

Contactless cards are another risk, making it easy to indulge in the kind of quick, small purchases that are encouraged by the numerous store displays by the checkout. These displays are set to get even smarter, with plans in place to introduce technology that detects the gender and identity of shoppers, helping them to target their ads.

Personal habits

At the centre of the battle between spending and saving is our own attitude to money management. In order to avoid impulse purchasing, with cash or with card, shoppers need to rationally assess their purchases, and allow a cool-off period before making them.

And in order to avoid overspending on credit cards, it's vital to keep track of your money. Our free budgeting software is the easiest way to do just that. Quick, simple, secure and accessible via mobile and tablet, Money Dashboard lets you view all of your financial data in one attractive space. You can see exactly how much you're spending, what you're saving, and what's left over for those vital shopping trips.


Posted by Marc Murphy, Marketing Manager at Money Dashboard.


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All content is for informational purposes only and is the opinion of the author. Nothing on this website should be interpreted as "advice". Money Dashboard Ltd make no representations as to the accuracy, completeness, suitability or validity of any information on this site and will not be liable for any errors or omissions or any damages arising from its display or use.

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