(844) 845-4219
Which payment type helps you stick to a budget? Cash, credit or debit

Which Payment Type Can Help You Stick to a Budget? » Build a Budget that Works for Your Goals » Which Payment Type Can Help You Stick to a Budget?



Sticking to a budget can be tough, especially with technology making things like balancing a checkbook and actively managing your credit card obsolete. It’s easier than ever to spend more than what you have in your checking account, which leads to overdraft fees. New technology can even lead to overspending credit. If you aren’t actively looking through your bills each month, you probably aren’t paying attention to your spending. That means you’re likely running up against high-interest charges added into your balances.

Thankfully, some modern-day payment companies are realizing the shortfalls of humans and are now actively trying to help us stay out of debt and truly save. But some traditional payment strategies still stand. For instance, the first and best way to avoid debt is to stay away from your credit cards whenever possible.

Managing personal finances effectively requires discipline and a well-planned budget. One aspect of budgeting that often goes overlooked is the choice of payment method. The payment type you use can significantly impact your ability to stick to a budget. In this article, we will explore various payment options and discuss which ones can help you maintain financial discipline.

Cash Payments vs Prepaid Cards

Using cash for transactions is a traditional and straightforward method. It offers a tangible representation of money and can help you become more aware of your spending. By physically parting with your cash, you may think twice before making unnecessary purchases. Cash payments can be especially useful for budgeting in categories where you tend to overspend, such as dining out or entertainment.

Cash payments are the traditional method of exchanging physical currency for goods and services. Here are some key advantages of using cash:

  1. Tangible Control: Paying with cash gives you a tangible representation of your money. By physically parting with your cash, you become more aware of your spending and may think twice before making impulsive purchases.
  2. No Fees or Interest: Cash transactions do not involve any fees or interest charges. When you pay with cash, you avoid potential costs associated with credit cards or prepaid cards, such as annual fees or interest on outstanding balances.
  3. Privacy and Security: Cash payments provide a level of privacy, as they do not leave a digital trail of your transactions. Additionally, using cash reduces the risk of identity theft or fraud, as you are not exposing sensitive personal information.

Despite these advantages, cash payments also have some considerations:

  1. Lack of Tracking: Unlike electronic transactions, cash payments do not offer an automatic record of your spending. It requires manual tracking and record-keeping, which can be cumbersome and time-consuming.
  2. Limited Acceptance: While cash is widely accepted, there are instances where businesses prefer electronic payments. Some establishments, especially online retailers, may not accept cash as a payment method, limiting your purchasing options.

Prepaid cards function similarly to debit cards, but they are not linked to a bank account. Instead, you load them with a specific amount of money, and you can only spend that preloaded balance. Prepaid cards can be useful for budgeting purposes, as they prevent you from overspending and accumulating debt. They are particularly helpful for individuals who want to avoid credit cards or have limited access to traditional banking services.

Prepaid cards, on the other hand, are reloadable cards that you can load with a specific amount of money. Here are some advantages of using prepaid cards:

  1. Control and Budgeting: Prepaid cards allow you to set a specific budget by loading only the desired amount onto the card. This feature helps you avoid overspending and stay within your financial limits.
  2. Convenience and Acceptance: Prepaid cards function similarly to debit cards and are widely accepted. You can use them for online purchases, bill payments, and in-store transactions, providing flexibility and convenience.
  3. Security: Prepaid cards offer security features such as PIN numbers and limited liability for unauthorized transactions. In case of loss or theft, you can easily report the card and have the remaining balance transferred to a new card.

However, prepaid cards also come with a few considerations:

  1. Fees: Depending on the card issuer, prepaid cards may have associated fees, such as activation fees, monthly maintenance fees, or transaction fees. It’s important to carefully review the fee structure before choosing a prepaid card to ensure it aligns with your budgeting goals.
  2. Limited Financial Benefits: Unlike credit cards that offer rewards or cashback programs, prepaid cards generally do not provide financial benefits. They are primarily focused on convenience and budgeting rather than earning rewards.

Credit vs. Debit

Credit cards are nothing more than temporary loans from a bank. They give you money up front that you must pay back at the end of the month, or billing cycle. The trouble starts when you spend more on your credit card than you have the means to pay off in a single billing cycle. This leads to higher costs, due to the high-interest rates attached to the cards.

If you are trying to stick to a budget, a debit card, cash, or cash-based payment methods are probably the best option. A debit card takes the money right out of your checking account, so you can only buy things with money you actually have. It’s like paying upfront with cash instead of at the end of the month as with a credit card.

Because debit cards are linked to your checking account, the one thing you need to be careful of is overdraft fees. This happens when you spend more than what you have available. It can be dangerous because unlike a credit card, you will be left with no money, and won’t be able to use the card until you have sufficient funds in the account. If you are on a cash-only system or only use debit, this could leave you in a bad predicament if you’re not careful.

Automatic, Mobile and Online Payment Methods

However, if you are being careful, there are some options out there that make it easy to pay your bills using your checking/debit account without having to write a check or use your card.

ACH Payments

If you’ve ever received a Direct Deposit paycheck from your employer, then you’re at least somewhat familiar with ACH payments. ACH, which stands for Automated Clearing House, was started by the National Automated Clearing House Association, or NACHA. It is a system that allows for transfers from one account to another.

ACH debit payments allow you to pay credit card bills or even your utility bills online. This is done by entering your checking account information into a secure online portal or server belonging to the company. Then you authorize a payment, either recurring or one-time only, and ACH will move the money from your account to the business’ account receiving the payment.

It can be a great option if you are someone who has a tendency of forgetting to pay bills. You can easily set up automatic monthly payments to have your bills paid directly from your checking account without worrying about it. The only concern here is if you forget how much you have available in your account, you could wind up paying fees for returned payments as well as overdraft fees if you don’t have enough to cover the charges.

If ACH payments for credit cards and other debts are constantly overdrafting your account, we can help. Get a free debt and budget evaluation to find relief options that will fit your needs.

Get StartedCall To Action Link

PayPal, Zelle, and Venmo

ACH payments have also taken off in the form of P2P, or Person-to-Person, payments. Companies like PayPal began using the ACH payment system years ago as a way to pay for goods and services online. While PayPal also allows for P2P transfers, two other companies have become really well-known for these capabilities, mainly because they don’t charge a fee to transfer money.

Venmo (which is actually owned by PayPal) and Zelle have become the go-to mobile payment services for millennials because of its near-instantaneous transfer capabilities. It allows the money to come directly from your checking account to pay back friends for everything from a coffee run to concert tickets in a flash.

Mobile Wallets and Apple Pay

Apply Pay and Mobile Wallets are essentially just a digitized form of your credit and debit cards. The devices use a near-field communication, or NFC chip, to transmit the credit card information you have in your phone to the payment terminal you are using. It requires nothing more than your phone and verification such as your fingerprint (through your iPhone button) to make a purchase.

For it to work, you will need to import whichever credit cards or debit cards you would like access to. Then when you are in a store that accepts either Apple Pay or mobile wallet payments, you can scan your phone and make a purchase. In Apple Pay and some other mobile wallets, you can also transfer funds to a mobile wallet card from your bank account and use the Apple Pay card as a type of prepaid credit.

If you use only credit cards in your mobile wallet, you will have to worry less about the actual money in your bank account. However, you need to make sure you are keeping tabs on your credit card balances. Remember, the interest accrues if you don’t pay your balance off each month.

All of these technologies make it easy to spend money but can make it much harder to save money. To counterbalance these, there are many different budgeting apps available to those looking to keep an eye on their spending habits, as well as even help you save.

Online Budgeting Apps and Other Budgeting Tools

One of the most popular budgeting tools has been around for more than 30 years. Quicken is the originator of digitized budgeting and allows you to link your bank accounts, credit cards and more to spreadsheets so that you can better manage your money.

Mint could, in some ways, be considered the online version of Quicken (both are owned by Intuit). You connect your financial accounts to Mint, then it tracks your spending and saving. An added bonus for those looking to save is that it is free to use.

A favorite of many finance websites is You Need A Budget or YNAB. This app requires you to download then upload your financial statement. It does not directly connect to your financial institutions and it also comes with a fee. Still, it’s budgeting hack is that it allows you to live off the previous month’s income and features many similarities to the other options, including spreadsheets and graphing capabilities.

Our favorite option at is Tiller. It takes old-school spreadsheet budgeting and makes it hassle free by automating the import of all your transactions. It links to your accounts, then gives you a spreadsheet that you can customize to fit your goals.

Money-Saving Apps

There are also options for those who are looking to unconsciously save while budgeting. These kinds of apps hit the mainstream a few years ago and are still around as either an investing tool or as a savings account.

These apps include Digit, which analyzes your spending habits then takes the money you wouldn’t use and puts it into a Digit savings account. Then, when you want the money, you can withdraw it.

Another option is Acorns, which rounds up to the nearest dollar when you are spending and then invests it into an Exchange Traded Fund for you.

Again, all these software and app options are just ways to help you create a budget and stick to it. They can be extremely helpful if you find yourself wandering dangerously close to the edge of debt and need some help to see where your money is going.

The Old School, Tried and True Way to Budget

If all this technology is proving too complex, the one tried and true way to succeed with budgeting is to go to an all-cash system. While you may need checks to pay bills, you would use cash to pay for all other expenses. Once that cash is gone, there would be no more spending until you reach your next “cash payday.”

Versions of cash-only budgeting include the envelope method and the 50/30/20 method.

  • In the envelope method, you first pay any bills that need to be paid by check or online, and then you write down the other expenses and divvy out your money accordingly. It’s now time to break out actual envelopes and write down those expenses on them. Put the designated amount of money within each envelope and then you are only able to send what it in that envelope.
  • The 50/30/20 rule is somewhat similar. It states that half of your budget goes toward essentials, like your home, food, electricity, etc., while 30 percent is available to be spent on whatever non-essentials you need and 20 percent gets saved.

The most important thing with all budgeting is that you know where every dollar is going. Once you understand where you are spending, it can sometimes be easier to cut back and reallocate funds to where you might really need it.

It can be hard in this day and age to keep track of where all your money is going, which often leads to overspending and credit card debt. Visit’s Money Tips section for more tips on how to save and how to stick to a budget.

Choosing the Right Payment Type

When deciding on the most suitable payment type to stick to a budget, it’s essential to consider your personal financial habits and goals. Each payment method has its advantages and considerations. Cash payments offer tangible control, debit cards provide convenience with spending limits, credit cards offer rewards but require responsible usage, mobile payment apps combine convenience and tracking features, prepaid cards limit spending, online bill payments save time and help avoid late fees, and automated transfers promote savings.

It’s crucial to assess your spending habits, financial discipline, and long-term goals. Experimenting with different payment methods can help you determine the one that works best for you. Ultimately, a combination of payment types may be the most effective strategy. For example, using cash for discretionary spending and debit cards for regular expenses can help maintain control over your budget while still enjoying the benefits of electronic payments.

Consider the following factors when choosing the right payment method for your needs:

  1. Budgeting Style: If you prefer a more tangible approach to budgeting and value the control that comes with physical cash, cash payments may be the better option. On the other hand, if you prefer the convenience of electronic transactions and want to set strict spending limits, consider electronic funds that can help you stay on track.
  2. Usage Scenarios: Evaluate your typical spending patterns and the environments where you make most of your purchases. Cash payments are ideal for situations where cash is readily accepted, such as local businesses or street markets. Cards are more versatile and convenient for online shopping or situations where electronic payments are preferred.
  3. Tracking and Record-Keeping: Consider your willingness and ability to manually track and record your expenses. Electronic payments require diligent record-keeping, while prepaid cards often offer online account management tools that automatically track and categorize your transactions.
  4. Fees and Costs: Take into account the associated fees and costs of each payment method. Cash payments generally do not have fees, while some electronic payments may have various fees depending on the issuer. Compare the fee structures and assess whether the benefits outweigh the costs for your specific financial situation.

Having trouble meeting all your monthly payment obligations? Too much debt could be the problem. Talk to a debt resolution specialist today to find solutions that can minimize debt payments.

Get StartedCall To Action Link


Will using cash payments guarantee that I stick to my budget?

Cash payments can be helpful in creating awareness of your spending habits and encouraging more thoughtful purchases. However, sticking to a budget ultimately depends on your financial discipline and commitment to managing your finances.

Are credit cards always a bad choice for budgeting?

Credit cards can be advantageous if used responsibly. They offer benefits like rewards and fraud protection. The key is to pay off the balance in full each month and avoid unnecessary debt.

How do mobile payment apps help with budgeting?

Mobile payment apps often come with built-in budgeting tools and expense tracking features. They allow you to monitor your spending habits more efficiently and stay on top of your budget.

Can prepaid cards help me avoid overspending?

Yes, prepaid cards can be an effective tool for budgeting. Since they are not linked to a bank account, you can only spend the preloaded balance, which helps prevent overspending.

Should I use a combination of payment types?

Using a combination of payment types can be a strategic approach. It allows you to leverage the benefits of each method while maintaining control over your budget.


Choosing the right payment type is an often overlooked aspect of budgeting. However, it can have a significant impact on your ability to stick to a budget and achieve your financial goals. By considering the pros and cons of various payment methods, you can make an informed decision that aligns with your financial habits and priorities. Remember, it’s not just about the payment type itself but also about how you use it in conjunction with budgeting tools and financial discipline.

How Much Could You Save?

Just tell us how much you owe, in total, and we’ll estimate your new consolidated monthly payment.