How to Stop Overspending

Overspending is a challenge many of us face, but understanding why it happens is the first step toward taking control.

We all want to save money, but did you know the way you pay can actually influence how much you spend? Whether it’s cash, debit, or credit cards, each payment method affects your spending habits differently. Let’s dive into the psychology and research behind these methods and find out which one really helps you keep more money in your pocket.

Mental Health and Overspending: Understanding the Connection

Overspending can sometimes be linked to underlying mental health challenges. For those dealing with ADHD, impulsivity can lead to overspending ADHD behaviors, making it harder to manage finances effectively. Similarly, depression can influence spending habits, raising questions like is overspending a sign of depression or does depression make you spend money. These patterns may contribute to what some describe as an overspending addiction, where spending becomes a coping mechanism rather than a conscious choice.

If you’re wondering how to stop overspending with ADHD or manage spending related to mental health, it’s important to seek support. Resources like the National Alliance on Mental Illness (NAMI) offer guidance on building financial wellness to enhance recovery. Additionally, the National Foundation for Credit Counseling (NFCC) provides financial counseling and resources to help regain control over spending.

Remember, if you or someone you know is struggling, the 988 Suicide & Crisis Lifeline is available 24/7 for support and assistance.

Understanding the mental health aspects of overspending is a crucial step toward managing your finances more mindfully. Now, let’s explore how different payment methods impact your spending habits and strategies to save money effectively.

Do Credit Cards Make You Spend More?

Many studies suggest that using credit cards can lead to higher spending. Here are some key research highlights:

People tend to spend 12-18% more when using credit cards compared to cash. This is because credit cards reduce the “pain of paying”, making purchases feel less costly in the moment. Read the study here

A behavioral economics experiment found that credit card users are more likely to make impulse purchases due to the delayed payment effect. Credit cards often come with rewards and cashback incentives that encourage more frequent use, sometimes leading to overspending just to “earn rewards.” Understanding these factors can help you be more mindful about how you use your credit card.

Credit vs. Debit: Is There a Difference?

While debit cards draw directly from your bank account, credit cards allow you to borrow money and pay later. But does this difference affect spending?

Research shows that debit card users tend to spend less than credit card users, but sometimes more than cash users. See the research summary here Debit cards still feel less “painful” than cash, but more immediate than credit. The key takeaway: Debit cards can help control spending better than credit, but cash remains the most tangible way to manage your budget.

Should You Ever Use a Credit Card?

Absolutely! Credit cards have their place when used responsibly. Here’s when to use debit/cash versus credit:

Use Debit or Cash When: You’re managing everyday expenses and want to stick strictly to your budget. You want to avoid the temptation of overspending. You prefer immediate payment and want to avoid debt. Use Credit Cards When: You pay your balance in full every month to avoid interest. You want to build or improve your credit score. You’re making planned purchases or bills. You want to earn rewards or cashback without overspending. Balancing these methods thoughtfully can help you stay in control of your finances.

How We Budget (Real Life Example) In our household, we use a mix of payment methods to stay on track:

Cash for small daily expenses like coffee or snacks — it keeps spending tangible. Debit card for groceries and recurring bills to avoid debt risk. Credit card for larger, planned expenses and online shopping, always paying off the full balance each month to maximize rewards without interest. This approach helps us enjoy rewards while preventing overspending and debt accumulation.

Final Thoughts: Don’t Let Plastic Rule Your Wallet

Credit, debit, and cash each have their pros and cons. The key is understanding how each affects your spending behavior and using them strategically. Stay mindful, budget wisely, and choose the payment method that works best for your financial goals.

Research Deep-Dive Links Journal of Consumer Research: Pain of Paying with Credit Cards NIH Study on Payment Methods and Spending Behavioral Economics of Payment Methods