How Small a Transaction Before Plastic Seems Absurd?
I’ve said before that contrary to popular wisdom, for me it seems I have a much harder time controlling random spending with cash than I do with plastic (in my case, a debit card). I know that the party line is that you spend more per transaction with plastic, and I’m not doubting that is the case with most people. I’m not even arguing that it isn’t the case with me. I don’t necessarily think so, but at the same time, I haven’t done any sort of detailed testing of my spending with cash vs plastic to show if it is or isn’t.
What I do know though, is that I have a hard time holding onto small amounts of cash. Why? Because there isn’t a transaction that is too small to use cash. It’s the leftover cash that is the dealbreaker for me. I can’t plan things like groceries down to the penny, so if I have $100 and spend $94, that other $6? Somehow it disappears before the next shopping trip. I have tried about 14 different methods to combat this with my yard sale money (I have a budget for shopping at yard sales for kids clothes over the summer) and honestly, the only one I have found that works at all is to go directly to the bank Saturday morning after yard sale shopping and redeposit the leftover cash. If I had to do that for every single transaction I made week in and week out, I think I would go insane. Yes I have an impulse control problem. I am working on it. I can only completely tackle so much at a time. 
But with plastic, at some point, the amount of the transaction is so small that it seems absurd to use plastic to complete it, so I just don’t do it at all.
This phenomenon could encourage someone to, instead of just purchasing the one item with plastic, to add other items they didn’t initially want just to make the transaction seem reasonable. That of course would make plastic a much worse deal as far as amounts of spending. I however, am not one of those people. I just don’t buy it. But if I have $6 in cash in my pocket and a craving for a latte, it is easy for me to justify in my head driving through the drivethrough and picking one up.
I am, however, basing all this information on my “self” before we started budgeting and being strict with our budget and really working hard on our financial situation. I might better be able to control my cash spending now. I haven’t carried around cash in close to a year at this point, any cash at all besides the quarter I need to free the shopping cart at Aldi’s (you get the quarter back when you return the cart). I might be better behaved with cash now. But there still is that big difference - with plastic, there’s a minimum amount I need to spend or I feel like an idiot. With cash, I have no such minimum.
I think my minimum debit transaction I can make with a clear conscience is $5, but it might be as low as $4. What’s yours?
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March 21st, 2008 at 6:09 am
I’ve used my debit card for as little as $1.25. I don’t do it all the time but I needed a soda and I didn’t have any cash.
March 21st, 2008 at 7:00 am
I use CC for everyday purchases, and I’ve seen only a few stores that have minimum limits on spending. I haven’t tried charging a dollar or so on a card, but I’m wondering if it would be rejected. CC co’s collect a set-fee AND a percentage in a lot of cases ($.32 + 1.45%) or something. Go too low, and their money gets eaten up by CC fees.
March 21st, 2008 at 7:04 am
I bought something for less than $2 yesterday. I would also buy 2 stamps at the post office. Where I am, a lot of people use plastic, so it doesn’t make me feel odd.
March 21st, 2008 at 7:38 am
I use plastic for everything. Period. I have no minimum. I’ll go to the hardware store to pick p 4 screws and use my CC. I do carry $20 in cash at all times in the event that I need some form of cash, but usually I never use it.
March 21st, 2008 at 8:37 am
I never use my debit card, as I want to get all of the rewards from credit card usage that I can possibly get. That’s also why I have no personal minimum for a transaction. I want that reward. I have charged under a dollar before, and will continue to do so.
I do carry some cash (for example, I needed $2 for my son’s school pizza party yesterday), but $20 will usually last me more than a month.
I’ve gotten a few looks from cashiers and other shoppers, but I don’t care. I just cashed a very nice reward check, thankyouverymuch.
March 21st, 2008 at 8:56 am
Well, yesterday, I bought a milkshake at our local ice cream store as part of my treatment for a yucky flu that has taken hold of me and used my debit card…no energy to go to the bank first.
March 21st, 2008 at 9:11 am
My smallest transaction was 18 cents at Kinko’s for 2 copies. There was no option to pay cash.
March 21st, 2008 at 9:31 am
I want to add that if I’m in a small mom-and-pop type operation I try not to charge under $10. Those small businesses are affected much more by the transaction fees.
I don’t feel the same need to help the larger companies. I figure they get much better per-transaction rates than small businesses.
These are my own odd ethics, call them what you will.
March 21st, 2008 at 9:57 am
I used to feel bad about charging anything less than $10 or so in a single transaction (I have it in my head that CC fees are something like a base of $.25 + some% for the first $somenumber, and then a sliding scale of % for the remaining amount).
But now that McDonald’s happily takes credit cards, I have no qualms about getting something off the dollar menu and charging it.
March 21st, 2008 at 10:33 am
I too can’t keep track of my change after a purchase and even that same night I struggle to figure out what I spent it on. It’s much easier and safer (for me) to just use a card rather than carry around a notebook and pen to mark down my purchases.
March 21st, 2008 at 10:36 am
I’m like you. I tend to spend small amounts of cash easily. I will spend on my credit card down to about $2. Anything less than that seems silly.
Like BeThisWay said, I try to avoid the smaller transactions with small businesses. I’ve actually had some say they won’t do credit on anything less than $x.
March 21st, 2008 at 10:59 am
Cash flows out of my pockets like water. I don’t really have a limit. Though when my last Walgreen’s deal came to 5 cents I wouldn’t charge that.
March 21st, 2008 at 12:41 pm
I have a cross between a hoarder mentality (I never want to let the cash go) and a reality disconnect (I feel more like it’s monopoly money) when it comes to cash. I think the former is an attempt to compensate for the latter.
Once the money is in cash, it’s no longer on my electronic “radar.” I can’t see it in my online accounts. Somehow it feels less real.
March 21st, 2008 at 12:41 pm
My smallest transaction was like 28 cents. I actually had cash on me and wanted to charge as little as I could onto my account, but the cash wasn’t enough.
However, normally I don’t have cash on me at all and will pay whatever I need to no matter how low with my debit or credit card. I don’t really think anything of it. You got to do what you got to do.
March 21st, 2008 at 1:26 pm
No minimum for me unless the store sets one. And then I usually won’t have the cash to buy the item anyway.
This is all on a debit card…I use my actual credit card only about twice a year.
March 21st, 2008 at 1:30 pm
I’d use plastic for 50¢ transactions if I could; it’s the only way to track my spending! To keep from going insane over coins and bills I have two plans in place at the moment:
We have a piggy bank where ALL change goes. Once a year we plan on going to Coinstar and get an Amazon gift certificate. I also keep an emergency $20 bill in my wallet. If I spend part of it (a -gasp- Big Mac!) I swing by one of the new ATMs, slide in the left over bills, depositing them into my account, and withdraw a fresh $20. This reminds me to record the transaction, and makes it hurt a bit more when I look at my bank balance!
I know others decry the takeover of plastic, but its been the difference in our being able to track our expenses. I think Mrs Micah’s got it! There are those who measure money by what’s in their pocket, others who measure their money/wealth by what they see on their balance sheets!
March 21st, 2008 at 1:56 pm
It is the opposite for me. I am less likely to spend cash than I am to use a card, simply because I subconsciously recognize cash as money… and it’s waaaaay to easy to swipe a card and not think about the cost that the purchase leads to. With that said, the tracking of expenses is definitely a benefit for using plastic, though, as Jay points out. I did some traveling abroad recently for about 2 weeks, and my credit card gives me some insurance that I can follow exactly what I spent, and where, which would have been a major hassle with cash (and dealing with foreign currencies, as well).
Jerry
March 21st, 2008 at 2:27 pm
I couldn’t agree more. I have a much easier time spending little bits of cash here and there, but using plastic for an item less than maybe 2 or 3 bucks just makes me feel a little silly.
March 21st, 2008 at 2:44 pm
Interesting and enjoyable post. I like reading about how other people handle the day to day events like this.
I use my Debit card as CC for virtually all transactions when possible (except when certain places are cash only). Small or large transactions, I use my Debit card. The main reason is that I get a receipt and can track exactly where I spend my money. I find this is a crucial part of keeping and maintaining a budget.
I started using YNAB a few months ago and it is perfect for me. Since I use my Debit card (as a CC though for rewards and other reasons), I have an audit trail where I can track every cent I spend.
I always try to keep $10 - $20 in my wallet at any given point. Sometimes it lasts for over a month and I never need to use it. Other times it is gone in a week. Once I go below $10, I withdraw what I need to take it back up to $20. I still keep track of the cash that goes out though. This way works well for me and my budget.
I keep a gallon glass jar on my dresser and deposit all change in there when I do spend cash (which is very infrequently). Usually once a year or when it is full, I take it to my local bank to cash it in. They have a coin star type machine and it is free to people with an account. Although I have not done this in close to year since it takes so long to fill it (which is a good thing I guess).
March 21st, 2008 at 5:40 pm
I don’t have a minimum debit card amount. I never carry cash, so I use the debit card for everything, no matter how big or small.
March 21st, 2008 at 5:54 pm
If I have cash in my wallet, it will get spent. On something. Anything. See that 50% off sale? I have cash! Buying with cash is a good thing, isn’t it?!?
Not if you spend every cent in your wallet!
Now I only carry 20 bucks with me at a time. Period.
I actually think about how much I am spending when I am writing a check more than with cash. I start thinking about how the check is coming out of my account, what other checks have cleared or have not yet cleared, what the balance is, and can I actually afford this purchase? (the same would be said for a debit card, but after someone stole my bank account info off the back of my debit card in October and wiped out my account, I do not play with debit cards. I will likely never have a debit card again.)
March 21st, 2008 at 7:50 pm
Now this is an easy one for me! My synagogue sells a variety of local supermarket gift cards and/or gift certificates as a “scrip” fundraiser, where they get to keep 5% of the face value as the fundraiser. For instance, if I need a $100 gift card to the local Giant supermarket, I will buy it from my synagogue for the $100 face value, they get $5 as a fundraiser, and it spends for me at the full $100 value. I use these supermarket gift cards/certificates as budgeting tools, so that if I only spend say $78 on groceries this week, the other $22 value remains on the card until my next grocery store visit. That’s win/win from both a budgeting and a fundraising perspective!
March 22nd, 2008 at 2:29 pm
I don’t really worry about the fees businesses pay as I assume most have raised their prices to cover it. I just feel silly using my card for something that is $2, probably because I’m afraid the cashier will think I’m broke or something.
March 22nd, 2008 at 4:47 pm
I have no minimum for debit or CC purchases.
The only cash that I carry on me is my monthly allowance. If I’m buying something for myself, like a latte, a bottle of wine
or a pedicure, then I use cash since it’s coming out of my allowance.
If I’m buying anything that comes out of my budget (groceries, gas, entertainment, postage, etc.), then I use my debit or CC card.
I use on-line banking and I check my account everyday and apply my charges to my budget. I use Pear Budget’s spreadsheet and I manually plug-in my numbers.
I used to feel embarrassed when I would use my debit for a small purchase so I used to go to the self checkout so that I didn’t have to face anyone.
Now, I’m trying mot to care so much. It is hard.
I went through a traditional register line the other day and used my debit for a $2 purchase. I felt a little “odd” but then convinced myself that it was ok.
It much easier for me to budget this way.
March 22nd, 2008 at 6:22 pm
Maybe you should ask my husband who charged .28 cents on our bank card at Home Depot. Me on the other hand…I probably don’t go below $2.
March 22nd, 2008 at 6:58 pm
I get 2% cash back on my credit card, so I use that for just about everything. You’re right, though, when it gets below $5, or even $10, I get some funny looks from cashiers. Merchants tell me that credit cards cost them about 4% of the transaction to process, while debit cards are less than 1%. So they like you better than me!
Lisa
March 22nd, 2008 at 7:29 pm
I agree with BeThisWay - if I am at a local store I will avoid credit card as much as I can, but if I’m at a chain, I’ll charge anything on a credit card.
March 22nd, 2008 at 11:44 pm
I don’t carry cash with me, period. I charge everything (budgeting carefully, tracking all charges, and paying in full at the end of the billing cycle). So if a store has a minimum and I want something that costs less than that, I just don’t buy there.
That said, I do agree with Be This Way: if it’s a Mom & Pop operation I try not to charge piddly little amounts. On the other hand…do you still have Mom & Pop operations in your part of the world? They’re pretty much extinct here.
Very rarely do I run in to minimums. It’s so unusual I wonder if credit card issuers are prohibiting merchants from setting a minimum for charge purchases.
March 23rd, 2008 at 12:45 am
for me i can not comfortable charge anything under 25$ i just feel awkward about the whole situation cause it takes more time than cash and for so little. i also can not charge any food items (its another weird issue i have)
for me this works out well, because most things i want are under 25, and if they are over i usually talk myself out of getting them.
as for the things under 25… i usually do carry around cash.. but not more than 20 and i will be like well i could get this but than i dont cause i think what if i get hungry later and i need to eat.
March 23rd, 2008 at 1:11 pm
I typically would pay cash for anything under $10, except if I’m at a restaurant where the meal is less than that… and recently, since I get 5% cash back at gas stations, if I run in and buy a Super Big Gulp equivalent, I’ll charge that. Seven cents is seven cents!
March 23rd, 2008 at 10:32 pm
I spent 9 cents at Kinko’s to make 1 copy. None of the machines take cash. I was intrigued that, despite the interchange fees from Visa & MC, it is still less costly than having a person dole out change to people making just a few copies or to service the oft-broken coin-operated machines
March 24th, 2008 at 9:21 am
I have gotten past not using my card for a small transaction if I don’t have the cash, but I do feel a twinge of guilt if the cost of the item is less than $2.
March 25th, 2008 at 2:30 am
I feel strange CCing anything less than $5. Perhaps I will bring myself to CC a coffee at Tim Horton’s but only because they put a system in… so they must expect it right?
If I knew there was no fee for companies with $5 and less purchases then I wouldn’t care
Great post, I linked to it
Elliott Russell
March 26th, 2008 at 4:30 pm
$0.75 medium drink at Sonic during Happy Hour (between 2-4pm every day!) when all drinks are half off. If I am really thirsty then a large is $0.83. At first I felt silly, but it faster and less embarrassing than handing the car-hop a fit full of ash tray change. Now I am trying to stop drinking soda totally, for money and weight loss reasons!
April 5th, 2008 at 8:37 pm
I almost never have cash with me, so I use my credit card for everything. I don’t think I’ve ever charged less than $2, and I think I would feel pretty silly if I did. I’d say I’m about the same as you - if all I have is a credit card and I want something that costs $1, I’m likely to just skip it.
April 11th, 2008 at 8:10 am
Just for the record… if a store claims they will not accept a credit card if the transaction is under a certain amount, then they are violating their credit card agreement. If a business accepts credit cards, then they accept credit cards. Period. If they require a minimum purchase, you can report them to the credit card company, and they may have their credit card priviledges revoked.
I found this out after being told at my local fabric store (a big chain store) that my purchase was not high enough to use my credit card, but asked if there was anything else I needed to bring my total up! (I think I was only buying a zipper or something). I was completely shocked, and called MasterCard when I arrived home. They told me this was in violation of their MasterCard agreement, and they would be investigating it. You should NEVER be asked to spend more money in order to use your credit card!! Like others here, I use my credit card as a budgeting tool (in conjunction with a digital envelope system). So I like to use my credit card whenever possible.