Relying solely on cash to make purchases can give consumers on a tight budget an advantage, because many people wind up stashing away more money that way.

Most people find themselves spending less money when they stop using credit cards because the amount of their discretionary spending declines.

"The best way to avoid high-interest credit card debt is to use a cash-only spending plan," said Bruce McClary, spokesman for the National Foundation for Credit Counseling, a Washington, D.C.-based nonprofit organization. "This system is very effective for helping people avoid impulse spending while staying focused on the most important priorities in their budget."

Sticking to the rule of paying yourself first is also important as well as setting up a budget, especially for consumers who are saddled with credit card and student loan debt.

"Using cash can have an indirect effect on your credit, since using it to grow savings and balance a budget may help you avoid taking on more debt than you can afford to repay," he said.

When consumers start using more cash for their purchases, they often skip buying unnecessary items.

"It creates discipline and challenges people to begin thinking in terms of wants versus needs," said Ron McCoy a portfolio manager on Covestor, the online investing company, and founder of Freedom Capital Advisors in Winter Garden, Fla. "With a debit card or even worse a credit card, it's way too easy for people to buy things they really don't need."

Using cash and sticking to a weekly budget is a "great way to save money and build wealth," he said.

Consumers use credit too readily when they should reserve it for major purchases like a car.

"Don't think you have to have a lot of credit cards just to have a good credit score because in the end, it can be a black hole you might not get out of," McCoy said.

While the premise of using only cash is good, budgeting apps and credit card or debit card transactions can help consumers track their spending easily, said Mark Hamrick, senior economic analyst and Washington bureau chief of Bankrate, a New York-based financial content and data company.

"Credit cards should be used as a tool and one of the beauties of electronic transactions is that they create a real-time record of discretionary spending," he said.

For people who are on razor-thin budgets and paying off credit card debt, sticking to their budget is the most critical item, Hamrick said.

"Too many Americans live above their means," he said.

Consumers must balance using cash to avoid accruing debt while creating a credit history for themselves. Loan providers want to see a history of people being able to pay bills and debt on time. This is crucial when people are seeking auto loans or mortgages.

Using debit cards or cash do not help build a credit history. People should make smaller purchases using a credit card and repay the full balance on time monthly to establish history.

"When it comes time to establish credit, a history of cash transactions may pose some problems during the approval process," said McClary. "For larger loans like a mortgage or the purchase of a car, having an established credit history is a significant factor in the approval process. This is especially true when it comes to qualifying for the lowest interest rates."

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