While I realize there are quite a few anti-credit card folks out there, I can't help but point out a few downsides of the envelope method and stand-up for credit cards (who always seem to get a bad rap).
1. Using cash doesn't offer any protection that credit cards provide. If you have a "situation" with a product or a store, your credit card company can be your best advocate.
2. If you carry lots of cash, you can lose lots of cash. If I lose a credit card or it "falls" out of my pocket thanks to the help of a quick-handed thief, it's easy to cancel. Even better, credit card companies limit your liability on fraudulent purchases. Usually with $0 deductible. Try getting back your envelope full of money!
3. The envelope method encourages overspending. I know that sounds counter-intuitive, but if you have $50 in this week's "restaurant" envelope, you are more likely to spend it. Perhaps you decide to order the dessert or a glass of wine that you wouldn't ordinarily have purchased just to use up the money in the envelope.
4. Credit cards allow you to hold onto your money longer. Having one bill at the end of the month allows me to hold onto my money longer, and earn interest longer.
5. Credit cards offer rewards. My current credit card offers 1% cash back on every purchase and 3% on gas. That money is automatically credited to my bill each month. So by paying cash, I'd be paying 1% more for most everything.
6. Paying with cash is a pain in the neck. I can't stand paying for something that costs $13.27 and getting back tons of coins. Or how about going to a sit-down restaurant where your bill including tip is $18.50. What a pain to have to try to make change.
I know it is popular to tout of the evils of credit cards (Dave Ramsey). Just remember, like every other business, credit cards are in business to make money. But you can play on your terms. Treat your spending like real money and pay it off every month. If you do, you'll come out ahead.