icansee4miles

I’ve decided to stop using money.

On reflection it’s not that difficult.   And there’s many, many reasons to prefer other forms of payment.   Here’s my ranked order of how I prefer to pay for personal expenses;

1. Credit cards
2. Automated account withdrawals
3. Debit cards
4. Cheque
5. Cash

Having credit as number one is easy.  I can get 1 - 2% of the payment back with a reward program.  In essence, if a merchant supports credit card payment - and you’re not using credit - then essentially you’re subsidizing those that are.  Merchants pay the credit cards companies when customers use their cards (in Canada the average retail merchant discount rate is about 2% of price).  So your first order of business should be to put as many of your regular expenses as you can on your credit card.  Which card?  Here’s a link to an excellent resource comparing and recommending Canadian credit card reward programs.

Besides the obvious (groceries, entertainment, meals, clothing, travel, gas, repairs), look into all your other expenses to see what can be put on the credit card (utilities, subscriptions, drugs, big ticket items - even some insurance premiums).  According to a recent ScotiaBank poll only 24% Canadians are using credit cards for everyday purchases.  This is a lost opportunity.

Besides rewards, another advantage of credit payment is, of course, credit.  Given that you’re paying your balances off in full by the due date, you’ll get a month or two of float.  Most cards will also provide you with extended warranties and purchase security (ie. a way to contest charges when purchases aren’t delivered whole).

Of course, you can’t put everything on a credit card.  Taxes and investments for instance, and some other payments.  Automated account withdrawals, debit cards and cheques are all really ways of paying cash - without the cash.  The advantage of these methods over cash -  include convenience and audit trails (and there some excellent resources available to help you analyse your expenses).  I’ve used - Wasabe, Money and Intuit’s Quicken. Of course, you get these advantage with credit cards as well.

Finally cash.  I started thinking about the instances that I actually use cash.  And they’re almost all gone.  My list of cash expenses is down to;

• Coffee shop,
• Cheap lunches at the food court, concession, or outside vendor,
• kid’s pocket money,
• Some gifts and gratuities,
• Very small store purchases,
• Foreign vacation spending (for a few reasons - cards aren’t always welcome and even if they are - you might be a little wary of identity theft).

As I thought about this - I’m fairly sure I could figure out ways to almost eliminate cash altogether.  Some coffee shops have gift cards or coupons that I can buy on credit - and there are lunch counters that support debit or credit.   My mission is to go 1 month and spend less than $20 cash.   I’ll let you know how I do.