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Advice: Credit cards offer convenience but may cost more in the long run

Credit cards have an increasingly larger presence in our financial lives. But if we are working hard to avoid new debt or pay down current debt, it may be important to find alternative ways to manage our money.

Credit cards are a convenience, but studies show that even if paid in full every month, people tend to spend more when using plastic. So even if you are getting reward points, are you really gaining anything?

Instead, using cash with a debit card backup can be an excellent way to keep control of your money if you follow a few basic guidelines:

* Pay regular bills, such as rent, mortgage, car payment and insurance, by automatic payment or check. This should include paying yourself first into a savings account. Then calculate your cash needs for groceries, gas, entertainment and other miscellaneous expenses. If you use an ATM to get cash, use a machine that won't charge you a fee.

* It is essential to allocate the cash for these categories into envelopes, jars or some means of separation. A wad of cash in your billfold is difficult to account for. You don't have to use all of the money allocated to each category for that time period, but don't allow yourself to go over. When the money is gone, it is gone.

* If you have children in the household, this allocation method can be a great way for them to learn the actual exchange of money for good or services. If they see the "fun" jar or "vacation jar" filling up, they can be a part of the decision-making on how to spend the money, and they will better understand the concept of saving for something.

* Since a debit card attached to a checking account is not extending credit (it is just another way of accessing your checking account), it can be used for the times you need the convenience of plastic. However, you must make certain you have the funds available to cover the transaction.

* Credit cards are often used for backup emergency situations, especially when traveling. Consider having a second checking account with a debit card just for these situations. Fund that account on a regular basis for periodic and other unexpected expenses. If in a separate account, it doesn't interfere with your regular monthly cash flow in your main checking account. You may find you will be more cautious about using the money than you might be with a credit card.

* For some transactions, such as online purchases, you cannot use cash and may not want to use a debit card. If you use a credit card in these situations, pay it off immediately to avoid debt building up and paying any other fees or interest.

Remember that using cash will require some caution. If you are not going grocery shopping, don't take the envelope with the grocery money. You don't want to risk losing or being robbed of your money.

You may not be able to avoid using plastic altogether, but it is possible to handle a good deal of your finances on a cash basis. You will likely find yourself spending less.

And there is no better feeling than not having to pay a credit card bill every month.

Marybeth Vigeland is a financial counselor at the Village Family Service Center in Fargo, N.D. She contributes to the blog Real Money at