The Non-Cash Budget System: How It Works and Who It’s For

Cashless budget

With there being a lot more buzz around the idea of cashless societies recently, you may be wondering how to manage and get the most out of a non-cash budget. You may also be wondering if it’s even possible to save and manage money effectively without relying on cash.

To help you out, we’ve revived and refined this article on a lesser-known yet effective non-cash budgeting system!

What’s a Non-Cash Budget?

First off, this isn’t exactly a real budgeting system. In fact, it’s basically the opposite of the popular cash envelope budgeting system that you may have already heard of.

So why are we even writing about this? Well, the cash envelope system isn’t for everyone. Withdrawing cash every week or month to fill your envelopes can be inconvenient, and for some budget categories, a cash envelope might not make any sense.

That’s why I use a non-cash budgeting system. And it’s basically exactly what it sounds like: I never carry cash and I charge every last cent on my credit cards.

Some of you may be thinking that sounds absolutely crazy, and for some, it is. Let me explain:

Who This Budgeting System is For

It’s actually probably more important to talk about who this budgeting system ISN’T for. Why? Because this system is definitely not right for everyone.

If you are a compulsive buyer or you have no control when it comes to credit cards, this system won’t work for you. Instead, it will most likely just wreak havoc on your finances. If that’s the case, check out these posts instead:

For those left reading, if you CAN show restraint with a credit card, this system will benefit you a ton! Using it has helped me never have to pay for Christmas, birthdays, or school clothes out of pocket. EVER.

How to Implement a Cashless Budget

Implementing the non-cash budget system is really simple as there aren’t many moving parts. Just follow these 5 steps:

Step 1. Identify what you want for free.

Credit card companies offer it all: vacations, plane tickets, gift cards, and simple cashback.

Do you want to accrue points like I do and earn gift cards? Do you want to rack up air miles and jet off to some exotic location? Do you want to give your bank account a little extra cushion each quarter and earn cash back? You decide what’s best for your family.

Step 2. Find the perfect credit card to match your needs.

NEVER pay an annual fee. You don’t have to. There are plenty of rewards cards out there with no annual fee. Just find the one that’s right for you.

I use a CHASE card. My goal is to earn gift cards, so we have a card that maximizes points earned. Your current credit card may already be perfect. Call your company to see what options they offer.

If you’re looking for a new card and are not sure where to start, read our guide on the Best Rewards Credit Cards.

Using this system, you will pay off the card every month, so the interest rate is not a concern. That being said, if you know you don’t have the will power to pay off your credit card each month, this system is NOT for you!

Step 3. Make a plan.

First, sit down and figure out what monthly expenses can be paid using your credit card.

Some credit cards (and mortgage companies) allow you to make your house payment on a credit card, while others do not. You would be surprised at how many monthly bills you can pay with a credit card.

Next, take an average of what you spend each month on everything else, ie. food, clothes, eating out, fun money, etc.

Finally, add everything up to get your grand total.

Here’s an example:

  • Paycheck: $10,000 (this is a fake scenario so let me dream please)
  • Monthly bills that can be paid on a credit card, ie. power bill, car payment, etc.: $3,000
  • Additional monthly expenses, ie. food, fun money, etc.: $3,000

Once you have your grand total, you can do these two optional steps:

  • Based on your reward credit card, you can roughly estimate how many points or how much cash back you’ll earn each month based on your spending.
  • Take the chance to look for places you can cut back in your budget, if necessary. Check out this post for tips: How to Save Money on Bills and Reduce Monthly Expenses.

And finally, you can set up an automatic credit card payment so that you never risk a late payment. Most banks will allow you to set this up online or over the phone.

Step 4. Monitor your expenses as you rack up rewards.

Just like you would your bank account, log into your credit card account frequently, and make sure you are sticking to your budget.

I personally use YNAB (You Need a Budget) to digitally track my budget and it helps me a ton. You might be fine managing it all in your head, or on paper. It’s all personal preference.

It’s especially important to monitor your expenses if you have an automatic credit card payment set up. You need to make sure you always have enough in your account to make that automatic payment. Otherwise, you risk an overdraft or missed payment.

Step 5. Redeem your rewards.

Because in Step 1 you have already identified what freebies you are working towards, this step will vary for everyone. We redeem our rewards 3 times a year.

Near Christmas, we use our points to buy gift cards and use those cards to buy our children’s presents. As summer approaches we cash our points in for birthday gift cards (we have a lot of summer birthdays in our family). And right before school starts, we use our points to buy gift cards to clothing stores for school clothes.

Final Thoughts

I like getting paid to spend what I normally would anyway. I have earned THOUSANDS of dollars in gift cards through the years.

While this system is tough for a lot of people because seeing such a high balance remain in your checking account all month may be tempting, if you stick to your budget, this system will work for you!

More Money Tips:

Non-cash budget system


  • This is exactly what I do, too. Only we just have a “register” (we use a columnar pad) and deduct it from there just as if it were a checkbook register, and then I “round up” so I get that extra money “stashed” as well. We have 2 main cards that we use based on which gives us better rewards for certain purchases (gas, groceries, etc) and we redeem the Amazon card points for GC’s for Christmas presents (or anything, really) and the other card we’re currently using is the Disney Visa which has earned us over $650 for our vacation in only about 8 months! (and only about 1/3 of that is actually from spending!).

  • We have been using this system for years! We just act like our credit card is our checking account and we deduct our expenses as we go along. I love having the credit card companies pay us interest instead of us paying them LOL! I use all of our cash back money to buy Christmas gifts and other fun things through out the year. Thank you for sharing ๐Ÿ™‚

    • My husband teaches people how to stay out of debt and we have, except for our house payment, absolutely no debt. We use our credit cards just like a bank account and let the credit card companies pay us interest every month. I think if you have the self control it works. If you don’t have the self control, this system is definitely not for you.

  • This is our system, too. I tend to be a little better at it than DH ๐Ÿ˜‰

  • We use our credit cards for EVERYTHING!!! Our family of four has been to Europe twice… we got there on FREE airline tickets and stayed in FREE 5 star hotels thanks to out credit card points. We are currently saving our points for a 3rd trip. This time we are planning on spending two weeks in Italy! I am so adamant about charging everything that I’ll even charge .29 cents at the grocery store ๐Ÿ™‚

    • What Credit Card company do you use?

      • We use 2 different credit cards. #1 ( American Express. Simply the BEST CARD EVER!!!! When you save up 20,000 points you can trade them in for 25,000 airline miles if you want to. (It takes 40,000 points for a ticket to Europe) Last time we went to Europe we stayed at the Westin Hotel in Dublin for 10,000 points per night. Not bad considering that it costs roughly $450 a night if I would have had to of paid out of pocket (which I never would of done in the first place). We also stayed in London for 10,000 points a night right around the corner from Harrods… Card #2 Alaska Airlines credit card… even if you don’t normally fly Alaska Airlines you can book free tickets to anywhere. I believe you can score 25,000 FREE points on each credit card just for signing up.

        We are on a two year cycle for Europe. Basically it takes about 2 years to save up enough points for 4 FREE airline tickets (that would retail for $1,000 each). When we have enough points we book the airline tickets. Typically you need to book your FREE tickets about 6-9 months ahead of time… which gives us plenty of time to start saving up for free hotel nights.

        When I say we charge EVERYTHING… I MEAN EVERYTHING… Every possible bill you can imagine… we charge it.

        I would much rather be on a two year plan for an exciting two week vacation that I normally would not go on than get 1% – 2% back in the form of a rebate check or something.

        As long as you have the self control to pay off your balance every month I think it’s great!

  • What are some of the best credit cards to get? I don’t have one and this sounds like a great thing currently I just use my banks debit card and for every 3 dollars I spend I only get one point and for a 25.00 gift card its 2,000 pts so it takes while to get there. so this sounds much better

  • Am I the only one who thinks this is SO risky?

    • I am thinking it is a bit too risky as well…

    • Paying with credit cards is risky if you don’t have control over spending! We pay for everything we possibly can with credit. We love backpacking, camping, hiking, playing outside….so we use the REI Visa and get REI cash back. We LOVE receiving our dividend check and spending our free money! This year we bought 2 top of the line baby hiking backpacks (twins) and can’t wait to get outside to use them.
      This way of living is only for those who are able to pay off their bills EVERY month. If you carry a balance, it isn’t worth the “rewards” as the interest will be more.

    • Bad idea! It has been found that you spend MORE when you charge. When you pay cash you spend LESS. Playing with credit cards is like playing with snakes.

      • I think it just depends on how you are with your finances. Not everyone spends MORE with a CC (though the same person might with cash)- in fact, as you can see here, no one is “playing” with CC’s, they’re using them very responsibly. It’s just a matter of discipline, whether it’s cash or credit…it’s just that you get extra benefits with credit by using it wisely, within your means, and paying off the balance in full each month.

        And I love Dave Ramsey and I think his advice is wonderful and has helped a great many people, but I don’t think that just because one doesn’t follow his method to a “T” that they’re irresponsible with their finances. A great majority of people who seek his help are already in financial trouble, and yes, they’re more likely to be “at risk” with lots of credit card use. And as for DR in general, some people CAN’T follow his advice and are still very well off…for example, my dad is a farmer and his income comes once a year- harvest. So they live off of farm loans until then, then they pay them back and start all over again for the next year. DR’s way is great for a lot of people, but it’s not the ONLY way.

        • I spend WAAY more when I carry cash, but that is just me. We all spend differently and have adopted different money management styles that work while shedding those that don’t. That is why I repeatedly warned that this system is not for everyone.

          It is VERY risky if you do not have the will power to pay in full every single month. Like I said in the post, it will wreck your finances if you carry a balance. But for me, this system has been wonderful. We have received so many benefits from using it and it is such a way of life now that it works for me. But again, it won’t work for everyone.

      • I totally agree with you! You do spend more when you pay with a C.C. than cash it is not about control or lack of control. It becomes personal when you pay with cash and detached when you pay with a C.C.

  • We never carry cash either, we pay for everything on credit/debit cards because both my husband and I spend cash like it is free money. We track every receipt and always pay the credit cards off in full each month (living within our means). We use the credit cards for the rewards and currently like Discover best because of the 5% cashback on certain things (changes every few months) and 1% back on everything else (you can also trade your points for giftcards). I can see how this would be very risky for some people and how the cash envelope system would work much better for them. This system works for us as well, but we go a little further and track each receipt in an Excel spreadsheet and keep track of our budget on a regular basis (almost daily) and then check to make sure each individual charge matches on the bill when we receive it. We stay under budget when using credit cards, but spend more when we carry cash. I think everyone just has to decide what system or variation of budgeting system will work for them and their family.

  • We also use a credit card for everything, except for places that don’t take credit (like WinCo) … But we pay the balance IN FULL every month and NEVER pay interest. We use the Costco American Express because it works for us, and we love getting our check every February. However, I know that this method won’t work for everyone. Paying with plastic just doesn’t feel like paying since you don’t physically SEE the money leaving your hands. I wouldn’t recommend the credit card method if you know you have no control when it comes to swiping plastic, but it definitely works for us.

  • Every one is right here! It works for many – and I almost envy those who it DOES work for! ๐Ÿ™‚ For me?? I DON”T do well keeping control of it and remembering how much I’ve spent, so cash is better for me… if it’s in my pocket, I’ve got it! If not – then I don’t buy it. As with everything, you find what works for you. ๐Ÿ™‚

  • This is a very clever system. I have tried to do something like this before, but it didn’t work for me, because I didn’t preschedule the credit card payment, so I would also spend the cash that was in the account and then we’d struggle to pay the card off. But if I prescheduled the credit card payment, then I would always have it in my head that the money had to be in there when the payment was taken out, so I wouldn’t spend it. That might work for us.

  • I would like to echo those who’ve already posted that everyone’s different and that’s why different methods work for different people. If I tried to use the cash/envelope method, I’d spend it all right away – that’s what I do with cash, it just flows through my fingers and I never even know where. But with a credit card, I stop and think about what I’m doing before I even pull the card out, let alone swipe it or enter the numbers online. For me plastic is infinitely better and cash is the risky way. It’s very much like dieting – for me low-carb works, for my best friend weight watchers is the only way she can lose. Everyone needs to find the method that works best for them ๐Ÿ™‚

  • Speaking of it being ‘risky’, there are risks in any budget/payment scenario but paying with credit cards is more secure from an identity theft standpoint than paying with debit cards, and you have no chance of losing your cash or getting it stolen.

    And a note for those of you who use this system (although you’re probably already up on this) the new credit card regulations have made many credit cards drastically change their terms and rates. While the rate doesn’t matter if you are paying the balance off monthly, some cards are now imposing fees for *not* carrying a balance, or introducing yearly fees, etc. Just make sure you check it out and negotiate with your company for what you want, or switch cards. You especially want to protect your credit rating if you are using credit for so much, a high limit is important to this system.

  • We use our cards for everything!! Every time someone hears that they cringe but it is nice to hear so many other people do the same thing. We pay it off every month so we get “fun” money, two years ago it took us to disneyland so it definately is the best way for us. If I have cash it is gone and I have no idea where it went, I feel like having the statement every month is a good way to keep track of my spending and my husband can see where I’m spending our money too. It’s not for everyone but for some of us it works, and it works for us!

  • I think I have been to convinced by Dave Ramsey that I never want a cent to be charged on my credit card ever again, even if it going to be paid off by the end of the month. I use the envelope system, and that works for me! I envy those who have the planning and organizational skills to be able to use their credit card for everything! I would end up not checking the statement and spending more than we should. It seems like a great option to get the rewards if you have the commitment to it!

  • I use this system, only I enter each charge into my check book, as if I were writing a check, then deduct from the balance, so I know how much I have left!!

  • I need a mix of the two somehow- I’m thinking about doing the envelope system, but I’d rather get the rewards- so I haven’t converted. Maybe just need to keep better track in a spread sheet, so I can take it out of the categories instead of envelopes.

  • I like to use the credit card for the rewwards too! That’s how I get to spend money on clothes. We use it like the cash system because we have a set budget, record every reciept and dollar spent in an excel spread sheet and check our account several times a week.

    I keep a small notebook in my purse also so that when I get in the car after leaving the store I can write down my purchase and deuct it from my budget so I know what how much is being used (just have a page for each category like you would have an envelope for each category.)

    If you remain accountable for your expenses I think either way works great! Just be sure to pay off your bill each month in full and you won’t have a problem (just like everyone else said).

  • We have done this same system for years and it works very well for us. We’re very frugal about how we spend our money regardless of whether it’s cash or CC. When we first started, we deducted everything from the checking register just like we were paying with our debit card…so for us, when it was gone, it was gone. I personally hate the risk of carrying around a lot of cash, so the envelope system doesn’t work well for me. I prefer the additional security a CC can offer. As time has gone on, I don’t track our spending quite as closely (as far as deducting it from the register) because our spending habits are pretty close to the same from month to month but I do check the online statement several times a month just to make sure we’re in check. We have NEVER left a balance on our card and have LOVED the free stuff/money we’ve earned by using it. I think the key here is being accountable for your spending regardless of how you decide to do it. Not every system is going to be for every person.

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