My husband and I are finding ourselves accidental players in an unofficial game called the Three Month Cash-Only Challenge. This challenge was devised by money-saving expert Crystal Paine in her upbeat personal finance book, The Money Saving Mom’s Budget (reviewed here). She challenged readers to do away with credit AND debit cards for 3 months, paying for all purchases with actual, physical CASH. Paine maintains that a cash-only lifestyle is second-to-none in requiring people to make the hard budgeting and spending decisions that are necessary to balance their budgets, and ultimately, to start saving their money for things that are truly important to them instead of frittering it away on miscellaneous purchases. (Incidentally, she does allow a few exceptions where debit cards can be used- when the purchase is online, or to pay a recurring bill like the electric bill, garbage bill, etc.)
But as much as my husband and I are committed to improving our financial situation, we were uninterested in participating in the challenge ourselves- we use credit cards to pay for virtually everything, but we always pay off our balances in full every month.
“We don’t have a credit card problem- we paid off our credit card debt,“ I said to my husband.
“And if we stopped using credit cards, we wouldn’t get credit card rewards anymore, “ my husband pointed out. (And that is the trump card right there- I am addicted to credit card rewards- we earn $25-$50/month in free gift cards, and most of the time it is my only way to get a shopping fix. What would I do without my shopping fix??)
“If we pay off our credit card purchases in full every month, then it’s really no different than using cash, right?“
And so, we concluded that the Cash-Only Challenge was unnecessary for responsible people like us.
Then, why do we find ourselves unwilling participants in the challenge right now? Well… because we want to refinance our home mortgage to get a lower monthly payment. And in order to have the best chance of success with that, our credit reports need to show $0 in credit card debt. The tricky thing about credit reports is that credit card companies report current purchases as debt, even if you plan to pay off the purchases that month. And it can take 1-2 months for your credit report to reflect that you’ve paid off your credit cards in full. So, in order to make our refinance application airtight, we need to show $0 balance on all 3 of the credit cards we use for at least 2 months. And since we have to be credit card-free for two months, we figured, why not make it three months and put Crystal Paine’s Three Month Cash-Only Challenge to the test?
Those of you who already operate on a cash-only basis are probably rolling your eyes right now, wondering what the big deal is. But the reality for me is that I have been using debit and credit cards almost exclusively for 15 years, and honestly, the thought of going cash-only makes me nervous. Will I run out of grocery money mid-month? Will my husband and I be miserable having to limit our purchases to cash-on-hand? Will I feel deprived when I don’t have credit card reward gift cards to use as spending money? Will it make us crazy to drive to an ATM every time we want to make an unexpected purchase?
I’ll be writing all about our experiences in this series, and the ultimate goal is to answer this: Will being a “cash-only” household change our family for the better? Or will the inconvenience of using cash, and the benefits of credit card rewards, persuade us to return to credit cards as soon as the three months are over?
Want more? In Part I: The Accidental Players, I explain how we wound up in this Cash-Only Challenge despite having no interest in a cash-only lifestyle. Part II: Grocery Budget Jitters describes how we weaned ourselves from credit cards and took the plunge into using cash. Part III: The Roller Coaster, tracks my logistical acrobatics (and occasional panicked moments) as I attempt to cover all of our month’s expenses before our cash runs out. In Part IV I report back on taking our Cash-Only Challenge on vacation with us. Part V describes the cash-only budgeting method we used to keep our spending on track.
Interested in doing a Cash-Only Challenge yourself? Check out Crystal Paine’s book, “The Money Saving Mom’s Budget” (which I reviewed here) and learn all about it. In her trademark upbeat style, Paine lays out the blueprint for a cash-only lifestyle.