Pros & Cons of a Cash Diet

A cash diet, meaning using just cash for daily spending, can help you avoid ringing up more credit card debt.

These days, many people’s spending habits are ruled by plastic. Debit cards, credit cards, and mobile wallets make transactions easy and effortless, but they can also make it easy to wind up with a mountain of debt and risky financial habits. As of 2025, U.S. consumers owed more than $1.21 trillion in credit card debt, according to the Federal Reserve Bank of New York. For some people, it might be worth trying out an all cash diet to help develop healthier spending habits.

Read on to learn some of the pros and cons of a cash diet plan, and how using cash may help you think about your money habits in a new way.

What Is a Cash Diet?

A cash diet plan involves using only cash for all of your day-to-day expenses. This could include paying for your groceries, filling up your gas tank, or covering the bill for a meal out with a friend. Fixed expenses, such as rent, bills, or any existing debt payments, generally aren’t included.

For people who are dealing with debt, a cash diet may provide an opportunity to develop more transparent spending — which may help in getting a handle on existing debt and manage money better.

What Are Some Pros of a Cash Diet?

Here are some advantages of a cash diet:

•  One of the biggest potential benefits of an all cash diet is seeing what you spend. When using cash to pay for daily expenses, you can feel the immediate loss of a dollar spent. When using credit or debit cards, the impact of the money you’re spending is delayed, potentially making it easier to overspend or rack up debt.

•  Another possible benefit of a cash diet is that it may provide more oversight over your expenses and budget. If you take out a specific amount of money, it’s easy to keep track of how much you’ve spent by simply looking at the amount of cash you have left. This could help you learn how to be better with money.

•  Overall, adopting an all cash diet could provide you with more control and awareness over your spending decisions. Even though you are likely dipping into your cash reserves more often, it could help you manage the money in your bank account more wisely.

Recommended: Five Ways to Achieve Financial Security

What Are Some Cons of a Cash Diet?

Next, consider the potential downsides of a cash diet:

•  In some places, restaurants and other businesses are increasingly going cashless. Depending on which establishments you usually go to, an all cash diet could prove to be a challenge.

•  Additionally, unlike many major credit cards and debit cards, cash isn’t covered in case of theft or loss. This is something worth considering depending on how much money you plan to carry with you at a time. (Or you might use your debit card as a way of paying in cash.)

•  Your purchases will not be covered by your credit card’s protection plan.

•  Credit cards often offer perks that can incentivize signing up and spending, such as credit card rewards points and miles, and cash back programs. Using cash comes with no such rewards. If you’re considering switching over to an all cash diet for the long term, it’s worth considering how losing access to these kinds of benefits may impact you.

•  With this diet, you’ll need access to cash. If it’s challenging for you to get to ATMs or retailers that offer cash back, this could be an issue.

•  It’s also worth noting that an all cash cash diet may not build your credit score. That’s because your credit score is derived from data on how you manage credit month to month and over time.

Starting a Cash Diet

If you’ve decided to try out an all cash diet, you might want to start by creating a budget. Once you’ve determined your average monthly net income, outline the fixed expenses you have — such as rent, bills, and debt payments — and figure out how much money you have left over after paying them.

Whatever money is left over represents the maximum you’re able to spend on day-to-day costs, such as food and gas. Cash dieters typically withdraw this amount in cash. Some might prefer to budget for the amount of time between pay periods or to stick to a monthly cash diet plan. The choice is up to you.

From there, a common way of organizing a cash diet is to use the envelope method. This includes outlining each of your spending categories — such as social activities, food and groceries, and shopping — and distributing your money across each area based on how much you typically spend. The cash for each of these categories is put in a separate envelope, which may make it easier to stay on top of your spending.

Since life isn’t exactly predictable, you might want to consider creating an additional envelope for unexpected expenses that may not fall into a regular category. An emergency fund could help cover unexpected costs like a car repair.

Managing an All Cash Diet

Though it may sound simple in principle, using a cash diet isn’t always smooth sailing. For instance, if you run out of cash before it’s time to replenish your envelopes — whether that’s at your next paycheck or at the beginning of the month — a cash diet dictates that you won’t be able to buy anything else.

Though an all cash diet may be helpful in improving your understanding of your spending habits and helping to curb impulse spending, it can also mean that you may have to get creative about how you deal with cash shortages without reaching for your credit card.

On the other end of the spectrum, there is a chance you may have some cash left over. If this happens, you could consider depositing it in your emergency savings account.

If you don’t already have a fund for emergencies, you may want to start one with any cash you have left over. If you have enough to save and put towards your current debt, then you might consider using the cash to make an extra payment on your highest interest debt.

Recommended: Emergency Fund Calculator

Understanding Your Spending Habits

Depending on your individual situation and goals, a cash diet may be a temporary experiment or a long-term strategy. You could try it out for a month to see how you feel.

Whether you’re in it for the short-term or the long haul, you may find that a cash diet gives you space to reflect on your money habits and develop a better understanding of where your money is going. A cash diet plan can be a valuable experience and can make it easier to build a more sustainable financial future.

The Takeaway

A cash diet involves using only cash for daily spending to help you control the outflow of money and avoid credit card debt. It can be a good solution for some people trying to manage their money better. The tradeoffs include the challenge of using cash at businesses that prefer plastic and the possibility of losing cash (or having it stolen), among others. If you do try a cash diet, it can be helpful to partner with a bank that has a robust network of ATMs.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What are the pros of using a cash diet?

A cash diet can be helpful as it encourages mindful spending and helps you avoid racking up high-interest credit card debt.

What are the cons of a cash diet?

Cons of a cash diet include the risk of losing cash or having it stolen, not earning credit card rewards, and not earning credit card rewards.

What is a cash diet?

A cash diet involves using cash for most or all of your daily spending, rather than relying on credit cards. It can help you better track your spending and avoid credit card debt.

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