Keeping a $20 bill in your pocket can seem like an enticement to spend it. That cash can also help you have less credit card debt by not having to swipe a credit card for small purchases.
A recent study by the Urban Institute found that using cash when a purchase is under $20 left the consumer with $104 less in revolving debt, on average. That dropped their credit card balances 2 percent below their baseline average.
For young people, the $20 cash rule led to more savings. People under 40 who were reminded "Don't swipe the small stuff" and to use cash on purchases for less than $20 had $173 less in revolving debt.
Credit keeps charging
The group also send reminders to credit union members that "credit keeps charging" and that using a credit card adds about 20 percent to the total cost of something.
People who received that reminder didn't significantly change the amount of their credit card debt, the survey found, but younger people did charge less. People under 40 who received the reminder about the cost going up by 20 percent with a credit card had $160 less in credit card debt.
A swipe is easy
Swiping a credit card can seem a lot easier and cheaper than using cash because you're not parting with anything tangible. Seeing a $20 bill leave your wallet can have more of a feeling of spending money than using a plastic card on the same thing.
A $6 cup drink doesn't look to bad when compared to a $5,000 spending limit on your credit card.
Having cash on hand is less likely to leave you making small impulse purchases, which is what most impulse purchases are. But those small costs add up.
If you don't believe it, try seeing how many small purchases you make in a week with $20 in your pocket and how often you need to go to the bank to withdraw $20 more. Then only use a credit card the next week for small purchases.
If you're noticing that you spend less with a tempting $20 bill on you, then you could be slowly solving a revolving debt problem that you may not have realized you had.