I had a somewhat alarming realisation the other day when I was trying to find a pound coin to put into a trolley at a supermarket. Not only did I not have a pound coin about my person right that second, but I probably hadn’t had any coins to hand for at least six months. I’ve become addicted to my debit card, you see, which is where the alarming bit comes in as I’ve always seen using my card a bit like using Monopoly money. You can’t really touch or see the cash in your hands when you use your card, so surely it can’t be real, can it? Probably time to check my account balance, isn’t it?
As foolish as I might sound, I am definitely not alone – a new study has shown how cash is slowly becoming anathema for people our age. A poll released today by CreditCards.com has shown that millennials have not only chucked the cheque book (has anyone our age ever used one?) but are also much more likely to forego cash altogether. Their research shows that while 77 per cent of people over 50 surveyed preferred cash to credit cards, only 48 per cent of those aged 18 to 29 use paper money.
In theory that should all be fine – especially if we’re using debit, not credit cards – but the annoying truth is that studies show that we tend to spend more money when we pay with plastic compared to when we pay with cold, hard cash. A study published in The Journal of Experimental Psychology found that actually handing over money triggers an emotional pain that helps deter spending, while swiping doesn’t have the same affect. The result is that cash discourages spending while plastic actively encourages it. Whoops.
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Amelia Thomas, a 27-year-old production manager, had to learn this the hard way six months ago when she realised – one week into the month – that she’d completely wiped out all her wages on new clothes, a holiday and dinner out without actually getting round to paying her rent or any of her bills. When she ended up putting over £700 on a credit card just to get through the month without getting evicted, she knew something had to give.
‘I realised that I’d been spending away like a lunatic all month on my debit card without once checking the balance on my bank,’ she admits to The Debrief. ‘I knew in the back of my mind that I was probably going to be in the red by the end of the month, but I had no idea it would happen after only a week. I just couldn’t keep on top of what I was spending because I wasn’t actually handing over any cash and it didn’t feel like real money.
‘Something had to give because suddenly I had a massive credit card bill to deal with. I budgeted myself with £50 a week which I’d take out of a cash point – for everything– until my finances were back on track. It was a bit shit because I had to walk to work and basically lived off couscous for a month, but I realised just how much I’d been overspending before and how freely I’d been departing with my hard-earned money.
‘Now, I only ever pay in cash and budget myself a certain amount for the week. Yes, I sometimes go over it, but at least I’m aware by how much and think seriously about the reason why before I just randomly spend. I’d say I save at least £400 a month now just by paying in cash – it’s forced me to be more thoughtful.’
Right, so... race you to the cashpoint, then?
Follow Sophie on Twitter @sophiecullinane
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This article originally appeared on The Debrief.