I never thought that debit cards would catch on but plastic has now taken over as most people's most used method of payment. During the pandemic many retailers and other businesses no longer accept cash, instead opting for contact-free forms of payment such as e-transfers, payment apps, and debit or credit cards. This can make it difficult for some people to control their spending and stick to their budget.
Cashless transactions eliminate the need to go to the bank to withdraw cash or carry it around with you which may be a plus. However there are serious downsides to going cashless such as the risk of identity theft and credit card fraud, and it is so easy to spend more when using plastic. Researchers say that paying with a credit or debit card reduces the "pain of payment" so that it doesn't feel the same as paying with cash even though the expense is the same.
Here are some tips to help you to keep your spending in line when using your cards:
- Keep track of your transactions as you go using a budgeting app or a spreadsheet.
- Limit your options, don't use multiple credit cards try and keep your methods of payment to your bank account on a debit card and one credit card. Once you have control of these payment sources you can add more options but keep things simple.
- Pay off your credit cards, in 2019 only 56% of Canadians paid off their credit cards in full by the end of the month and the other 44% were paying the high interest from having a balance. This is not a good situation to be in because it means that you are spending more than you make. If you do have a credit card balance with high interest think about getting a card with a lower interest rate and no annual fees even if you have to forgo the travel points for now.
- Going cashless means we are more likely to impulse buy. If you are buying on-line pause before you finalize the sale to consider if you really need the item. Also companies track whether you have completed a transaction or not and if not they may contact you with a better price to encourage you to buy.
- When your mortgage comes up for renewal don't just accept your bank's offer. Shop around to see if you can get a better deal. Reducing your interest rate by only 0.5% could mean that you will save thousands of dollars.
- Stay away from targeted ads. Everyone is on-line a lot these days and ads on social media will target you using information from previous purchases.
- Check your credit score - this will not always affect your credit score as many banks offer a credit-checking feature using a simple button on their app. Use it to check for any errors or discrepancies.
From an article by Margaret Craig-Bourdin