Spending only the cash you have is the best way to maintaining financial independence. However, I've always wondered if the cash-only system works for people who suck at keeping records. I tapped my contact at Visa (who is one of our sponsors) to see if they did any research on the subject. They responded with some pretty interesting data on the different ways people keep records while using debit cards or cash:

Just last year we conducted a consumer survey and found that cash expenditures can be harder to keep track of than those on cards. We asked more than 2,000 U.S. adults about their cash spending habits and almost half of respondents admitted they suffered from “mystery spending” or cash they spend but have no idea where it went. The results also showed that 48 percent of Americans surveyed who use cash say they can’t account for almost one-third of it, spending an average of $120 in a typical week, but losing track of $45. In fact, more than half (59 percent) of respondents who say their mystery spending is out of control feel it would be worse without using a debit card.

Among debit cardholders we surveyed, the majority (64 percent) believe their debit card helps keep mystery spending to a minimum and four out of five say a debit card helps them track their spending. This feedback supports that debit cards can definitely be used as a money saving tool.

Paying with a debit card allows you to manage your money in real-time. For example, when you withdraw funds from an ATM or use your debit card at a register, most transactions are reflected in your account immediately. You can use this information to your advantage by closely monitoring your account. You will always have a sense of your balance and you will always have a ready record of your transactions.

Are there any other ways that using debit cards help you manage your money?

Definitely. First of all, when you use a debit card, you’re withdrawing funds that are already available in your checking account which means you’re spending the money you have. You also get a record of all purchases so you know where the money went. Most banks make debit statements available online, by phone or even ATM so you can check your account regularly to know where you are spending and how much you have in real-time.

While cash purchases — especially for smaller amounts — can be difficult to track, our research has shown that people believe debit cards can help them monitor spending more closely. Four out of five debit card users surveyed agree that using a debit card provides an easy way to track spending.

I always take corporate-sponsored research with a grain of salt and I recommend that you do the same. However, some of Visa's results make sense, especially if you take into consideration that online tools like Mint and Wesabe can help you track your debit card spending in interesting new ways. I would love to see more independent research on this subject from Mint and Wesabe.