Pros & Cons of Living That Cash-Only Life

I went to Europe for a week and paid for everything with cash; partly because I didn’t want to pay international transaction fees for every little credit card transaction, and partly because I wanted to tell you what it was like.  There are a few caveats: I didn’t pay for my airfare or lodging with cash, and I was required to use my credit card to pay for things while in the air: i.e., essentials like wifi and snacks.  Other than that, I chose to subject myself to this high-pain method of payment for your benefit.

Here’s what I learned, in pros & cons:

Con: You have limits; know them.

ATMs will only allow you to withdraw a certain amount of money at a time, and your bank probably has restrictions on how much you can take out, too.  This is particularly important if you’re attempting to pay for something substantial, such as your lodging for the week, in cash.  For such substantial purchases, you would have to plan farther in advance.

Pro: You escape extra transaction fees 

Think of it this way: if you have a card that has a foreign transaction fee, you’re going to pay that fee on each individual transaction made with a credit card, and those little amounts add up quickly.  In one week, I would have spent an extra $28 in fees by paying with my credit card.  There are still more fees when you choose to pay in your home currency, which is an option with many credit cards. Because you’re also likely to spend more with a credit card, the fees will be higher still.  Don’t give your money back to the bank—that’s yours and you earned it.

Pro: There’s this thing called the Global ATM Alliance

My bank is part of this network that allows you to withdraw money from a partner ATM without incurring additional fees.  There is still a 3% foreign transaction fee, but you don’t pay that annoying $5-ish dollars for using an ATM at a different bank.  It’s not always convenient, of course, to have to hunt down a specific bank, but those fees add up over multiple withdrawals.

Con: You watch your money disintegrate so quickly

Because their smallest paper bill is 5€, euros quickly turn to a pile of coins that can really weigh you down. Paying in cash also keeps you very conscious of how much is left, which can leave you tempted to make trips to the ATM multiple times a day.  I would suggest spending down as much as you can in between cash withdrawals; you want to track your spending, not maintain a certain amount of money at all times.

Pro: You limit impulse purchases

Research supports the idea that paying with cash limits your purchases and how much you spend.  When paying with a credit card, we have a certain psychological detachment from the concept of money.  Cash, on the other hand, forces you to confront a particular amount and can be more painful.  I found that I was a much more deliberate spender when it came to my cash, unless I had just withdrawn a whole bunch—in which case, it was burning a hole in my pocket.

Pro: You have absolute peace of mind about your bank account

By far the greatest benefit of paying in cash was knowing exactly how much I had in my bank account at all times.  There was no guessing game where I would come back to the apartment at night and wince while opening my mobile banking app, in fear of what I might find.  I felt comfortable spending the cash I had, because I knew I was well within my limits.  I couldn’t possibly overspend, either, because once the cash was gone, that was it.  If you’ve been on a vacation where something was suddenly far more expensive than you anticipated, you know that sinking feeling of facing your bank balance the next day (or when you get back home).  In the case of cash, there are times when you would have to walk away from a purchase because you didn’t have enough.

I loved the feeling that I was totally entitled to spend the cash in my pocket; I am typically the person on vacation who will talk myself out of a purchase that I really should make, for a souvenir or because the product is only available in a particular place, and I’ll end up spending far more in shipping costs later to buy the same thing from far away.  Knowing that I had saved and budgeted this cash, and I could spend it freely, was the by far my favorite thing about a cash-only vacation.  If you have a tendency to fret over whether or not you can afford something, knowing your finances inside and out is the way to get over this fear and treat yourself—after all, you’ve earned, saved, and budgeted this money for your vacation, so you might as well enjoy spending it.

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