Consumers shifted away from using cash during the COVID-19 pandemic and are continuing to embrace digital payments. Steffen Kaplan, a social media and visual consultant, used to prefer cash but switched to credit cards due to the pandemic. More Americans are also transitioning to digital payments, with digital wallets being the most popular method for e-commerce and credit/debit cards for in-store purchases.
However, some individuals find it challenging to manage their spending with contactless payments. Eric Simonson, a certified financial planner, warns that transitioning to credit cards can lead to overspending as it’s easy to lose track of expenses without physically handling cash.
To avoid falling into debt while using digital payments, it’s essential to pay off your credit card balance each month. Financial experts suggest treating your credit card like a debit card and paying off purchases immediately to prevent overspending. Setting limits on your credit card expenses and regularly reviewing your spending can also help manage your finances effectively.
If using credit cards becomes overwhelming, some suggest sticking to cash as a budgeting tool. Cash can limit your spending to what you physically have, preventing you from overspending and accumulating debt.
According to David Tente, executive director at the ATM Industry Association, once you exhaust your cash, your spending for the month comes to a halt.
On the contrary, when you use credit cards, you have the flexibility to continue spending up to your credit limit. However, this means you are responsible for paying back the amount spent.