Which Payment Type Is Best If You’re Trying to Stick to a Budget?

Trying to get your finances on track so you can save more and spend less? (Yeah, same.) But which payment type is best if you’re trying to stick to a budget? Credit cards? Cash? Apple Pay? With so many options, we don’t blame you for being confused. Here’s how to weigh each approach and figure out which method is best for you.

Unlike a credit card, which can feel like magic money, cash or a debit card forces you to pull directly from your bank account with each transaction. 

The main perk to this method is the fact that you can only spend what you have (or get issued an overdraft fee). In other words, if you want to shell out $400 for a new pair of boots, but you don’t have the funds, your hands are tied. 

The envelope budgeting method is a particularly smart way to spend cash only. It works like this: Every time you get paid, you hit the ATM, take out your money and divvy it up into envelopes based on your bills and monthly spending habits. (Think rent, groceries, entertainment, etc.) When the cash runs out, that’s it for the month. It’s harsh and finite, but it’s a great way for overspenders to get their habits in check.

While budgeting with a credit card (or Apple Pay, which is basically your credit cards preloaded onto your iPhone) gets a lot of flak, it can actually be pretty effective, provided you have the self-control to pay off your balance every month.

This method lets you keep all of your expenses in one place, so you can see your spending at a glance—where you went over, where you spent less than anticipated, where you went a little nutso with your late-night Amazon perusals. Many cards will even do the work for you, separating expenses into categories like “groceries” or “retail.” 

The downside to credit cards is that the “cash” you’re spending is really a temporary loan from the bank. If you go over what you can afford—say, you splurge on that $400 pair of boots and spend money you don’t have—you’ll start to incur debt. And with credit card debt comes high interest fees.

It all depends on your spending personality, but personal finance expert and Chase ambassador Farnoosh Torabi ultimately promotes credit card tracking.

“If you need all the reinforcements to make sure you don’t overspend, stick with cash,” she says. “That said, paying with cash all the time just isn’t practical. And walking around with a wallet full of bills is risky.” 

Instead, Torabi recommends paying with a credit card to stick to a budget, mainly because you can track your spending habits and your purchases are protected. “It’s a nice, streamlined way of managing your expenses, as long as you pay it off in full every month.”