There's convenient, and then there's too convenient. The concept of chopping up credit cards to kick a spending habit has been around for as long as charge cards themselves have. While it is an effective means of avoiding charge debt, it still begs the question: Do consumers really spend more when it's plastic versus good 'ol greenbacks?
As it turns out, the overwhelming answer to that question is “yes.” While it is possible for a consumer to keep a record of their credit and debit expenses, it doesn't happen very often, and without exhaustive record keeping, consumers can find themselves forgetting how much they've spent over the course of a month, particularly if they use their charge cards for relatively innocuous, small purchases. Although it may be an unintended by-product with debit cards, it does still happen, and there has been a ton of research to back it up. Additionally, racking up those reward points on your charge card could lead you to overspend, thinking all the while that you're getting a really great deal. The truth is, that you might be overspending enough to pay for that trip or shave those pennies off a gallon of gasoline without using the card at all.
Unfortunately for consumers but fortunately for credit card companies, this is in no small part design. After all, spending cash dwindles physical reserves, while spending on credit allows you to put off thinking about paying until 30 or 45 days later. Credit card companies don't make money on paid-off balances, so they like when you carry that debt longer than the interest-free grace period.
It is possible to curb this tendency to spend with plastic, though it may not be easy. Credit and debit cards are intentionally convenient. To start with, try to reserve credit card purchases to just one or two transactions per month. Avoid paying for day-to-day things like lunch, gas or groceries with them, instead favoring a check or cash.
When you use a debit card, it should really be treated like a paper check since it draws from your checking account. Just want a pack of chewing gum, but don't have time to write the transaction down in your check register? Tough. Pay cash for it. Keep that check register handy and keep track of all your account's debits and credits. This will help you not only to avoid overdraft the account and spending $30 on a pack of chewing gum, but keep your checking balance in mind, as well. It isn't always totally necessary to write down the amount immediately, but try to get into the habit of keeping and noting your receipts as soon as you get home.
Once you begin to realize how much you actually spend on non-essentials using your debit and credit cards, you'll see where your monthly budget's leaks are located at. Once you can see where the leaks are, stopping them becomes that much easier regardless of how painfully convenient those little plastic cards are.