Cash makes a comeback

RALEIGH, N.C. — It’s now common for shoppers to slap down their credit or debit card for something as small as a cup of coffee or a pack of gum. But some are returning to the old way: They’re paying cash.

Turning away from the age of plastic, these shoppers say that the act of handing over that cold, hard cash makes them think twice about spending — in a way that using a card does not.

“”When the money’s gone, it’s gone,”” said Kristi West, a Raleigh mother of two who is moving her family to a cash-only system for most purchases this year. “”You can feel that money, and you can look at that money, and you can count it. When you slide that debit card, you just slide that card. “”It’s teaching your mind to go from the tangible to the intangible,”” she added.

There are lots of reasons people might consider switching back to cash.

Some, mired in debt and cut off from credit lines, may have no choice. Others may simply be feeling the pinch of the continually tight economy and mounting household debt.

That’s not to say credit isn’t king. It’s generally safer than carrying lots of cash, most cards come with some kind of rewards, and there’s the ease of use, especially as more of us make purchases online. In the United States, the average household has at least one credit card and carries nearly $10,700 in credit card debt, according to CardWeb.com.

Debit and credit card transactions continue to increase in popularity — up from a combined 38 percent of all transactions by sales volume in 2005 to 45 percent in 2010, according to The Nilson Report.

But there’s no question: Cash is holding its own as part of a broader trend by some shoppers of getting back to basics after the recession.

Despite the increase in credit and debit transactions, cash payments have remained fairly stable. Nilson reports that cash transactions went from 21 percent of transactions by volume in 2005 to 19 percent in 2010.

“”Consumers that carry a balance even occasionally or have had trouble making their payments in the past are increasingly gravitating toward other methods of payment either by choice or by force,”” said Greg McBride, analyst for financial website bankrate.com. “”For some consumers, it’s a fundamental shift.””

Samantha Comfort of Garner, N.C., is switching to cash to try to better control her spending. She wants to achieve several financial goals this year, including paying off her car and an emergency $3,000 car repair from last year that the family had to put on credit.

One of her credit cards has started charging her a $5-a-month fee, but she can’t cancel it yet because she’s still paying off the balance.

“”That card is on the chopping block,”” she said. “”I’m hoping by March to be able to tell them to take a flying leap through a giant doughnut.””

Even shoppers who are debt-free are changing over.

Cyndy Bunn of Rocky Mount, N.C., is already a frugal shopper. She keeps her finances using money management software. She clips coupons, grinds wheat that she uses to make her own bread, and barters with friends for goods and services.

But she said that even for her, overspending is too easy when you’re swiping your debit card.

“”In my mind, I didn’t add it up,”” she said. “”I’d go to Lowes, I’d go to Harris Teeter, I’d go to Food Lion. You’re not thinking. … I’m just trying to save in every way, and I feel like cash is going to force me to be better.””

Changing the way she budgets and spends has been tough, Bunn said, because it has required her to cut back on purchases she would have previously justified as OK because it was a good deal.

Under her new cash system, she has set herself a grocery budget of $350 a month — roughly half of what she’d spend sometimes in a month.

“”Last week, when Lowes had their turkey breasts (on sale), I didn’t have any more money,”” she said. “”So I didn’t get it. And I don’t know if it was wise or not. … I left it there. Before, I would have just bought it and increased (my budget) for groceries.””

And she had to get over the stigma of being a non-card-swiping member of society.

“”I do feel a little like Granny pulling out my cash to pay,”” she said. “”I keep telling myself, when I was a teenager, there was no such thing as a debit card.””

Not only is it tough to adjust to a new way of paying, but surviving in the world today is logistically difficult without a credit card.

Even most people who are converting to the cash system are still keeping a card for emergencies and for certain things, including online purchases.

“”I would go cash with everything, but some things you really can’t,”” Comfort said. “”We’re Netflix people, and I can’t pay for Netflix with cash. Or, booking a hotel is pretty tough to do with cash. I’m going to have to keep a card, maybe even two. But there’s just no reason for it.””

Kristi West ran into trouble at the doctor’s office.

“”I was at the doctor’s office, and I looked at my husband and I said, ‘I don’t even have my debit card. How can I pay for this?'””

Still, proponents of the system say the hassle of re-learning how to spend in cash is worth it, especially when it comes to teaching their kids about money.

“”They do have to adjust because they were used to kind of having whatever they wanted to a point,”” Bunn said. “”I’m just telling them to be thankful for what we have and that this is what we have in the house.

“”I’ve had to repeat that lately more than ever.””

Bankrate.com analyst Mc-Bride warned, though, that this system is not for everyone. For the 40 percent of credit card holders who pay off their balances every month, it may make more sense to take part in a rewards program that gives airline miles, cash back or some other reward in return for items charged.

“”You’ve got to know what’s a fit for your personality,”” he said. “”But regardless of what you choose, the theme of better governing of our own finances and getting a handle on our spending is a positive development.””

———

CASH VS. PLASTIC

Cash: