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4 factors to weigh before going all cash

Spending cash "forces you to come up with a spending plan beforehand," says Jacobs, a Cerified Financial Planner and founder of Step by Step Tax and Financial Planning LLC.

The couple followed their spending plan religiously, squirreling away money to cover emergencies like car repairs and to supplement savings for future needs. When the car needed a $65 tire, "we just paid it," says Jacobs. "It was a good feeling."

2. Is a debit card paper or plastic?

Tyson, who also wrote "Let's Get Real About Money: Profit from the Habits of the Best Personal Finance Managers," believes a debit card is a good intermediate step in going all-cash. "I'm a big fan of the debit card," he says. "You still have the benefits and convenience that come with plastic, without spending money you don't have."

"When you fork over cash, you kind of feel the effect of that," Tyson concedes. Another downside of the debit card is that you "have to be aware of how much money is left in the account."

That can be a problem if you have one account and more than one user.

But Grace Case, a Syracuse, N.Y., mother of two and a corporate accountant by profession, uses a debit card for virtually everything. She says her secret is to treat it just like paper money. It just provides more convenience and security, she says.

3. Is there still a need for a credit card?

Sometimes, planners also will include credit cards in their cash diet for special circumstances.

When they went to a cash plan, the Fernandezes made two exceptions for using credit cards. The first was at the gas pump. "It's more convenient," says Fernandez. Besides, gas is not exactly an impulse buy, he says.

The second exception is vacation travel. "I'm not going to carry a ton of cash," he says. When the couple went on vacation, they stuck to a budget and paid off the cards when they returned.

Americans are accustomed to traveling with plastic. "To reserve a room, you have to have a credit card," Case says.

With a debit card, some venues such as hotels and gas stations will put a temporary hold on more than the purchase amount -- a problem if your balance is low or the money is needed elsewhere.

Still, Ramsey hasn't had a credit card in 20 years and travels with a debit card without a hitch. He's also found he and his employees watch charges more closely than with a credit card. "You tend to notice it more," he says.

4. Can you protect your credit score?

Going to cash can impact your credit rating.

If you're taking the money you save every month and paying down balances, then your scores should improve.

If you pay off your balances and don't have any other outstanding debt such as a mortgage or car loan, then sometime in the next six to 18 months, you may discover that you have no FICO score, says Barry Paperno, consumer operations manager for Minneapolis, Minn.-based Fair Isaac Corp., the company that created the FICO score. That can happen if you have no card activity and the company stops reporting your account to the credit bureaus.

In addition, a card company can close your account if it's inactive, meaning it has a zero balance and no charges for a period of time. The time varies among card companies. But because part of your score depends on the credit you use (your account balances) compared to the credit you're allowed to use (your credit limits), suddenly having less available credit could lower your score.

Paperno recommends using cards to automate small monthly expenses, such as prescriptions or fixed bills, "so you don't have to think about it."

However, if want to retain your credit score and move to an all-cash payment program, there is another easy solution. Once you pay balances to zero, use each card you wish to keep at least once every two to four months for something small. Then pay the balance when the bill arrives.

You can also check your credit reports for free at AnnualCreditReport.com to see that the accounts are listed as open and active. You can pull your credit report for free from each of the three bureaus once every year. Just select a different one every four months so you can check on your accounts year-round.

The bottom line for Sheryl Garrett, a Certified Financial Planner and founder of the Garrett Planning Network in Shawnee Mission, Kan., is a cash lifestyle can reduce stress.

Her own plan includes debit cards and automated payments. Says Garrett, "We can still live in the modern age and do things as simply as possible."

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