Why are some so against credit cards?

[disneysteve]

Originally Posted by jpg7n16

For the record, I use CCs, I like getting 5% back on gas, I don't drink alcohol, and I gamble periodically. All of which I feel are done responsibly

I use credit cards, drink and gamble. Not sure what that says about me.

[wincrasher]

Originally Posted by disneysteve

Can you clarify this point? I think I know what you mean but others may read this as being able to buy something that you don't have the money for.

What I mean is that, if I see something that is a terrific bargain, I don't have to worry about if I have the money in my pocket or in checking. I can get the deal and pay the bill when it comes.

It does not mean that I buy something just because it is a good deal.

But there usually are of handful of things I'd like to get, but I can wait until they go on sale. So when they do, I'm ready to go.

[jpg7n16]

Originally Posted by disneysteve

I use credit cards, drink and gamble. Not sure what that says about me.

That if the blackjack tables in Vegas start taking credit cards, watch out!

[jpg7n16]

Originally Posted by wincrasher

What I mean is that, if I see something that is a terrific bargain, I don't have to worry about if I have the money in my pocket or in checking. I can get the deal and pay the bill when it comes.

Agreeing w/ DS, this again sounds like a variation of, "well I don't have the money right now, but I can go ahead and buy it today"

Where do you get the funds to "pay the bill when it comes"??


I rarely carry cash, so I feel you there - but I always have enough in checking to cover whatever I'm doing on the card.

[disneysteve]

Originally Posted by jpg7n16

Agreeing w/ DS, this again sounds like a variation of, "well I don't have the money right now, but I can go ahead and buy it today"

Where do you get the funds to "pay the bill when it comes"??

Actually you aren't agreeing with me. I do the same thing as wincrasher.

The point isn't that we spend money we don't have. The point is that we have the money but just don't carry it with us.

It is true that if I go to the store with $50 cash I can only spend $50. But if I only go to the store with $50 cash and they are having a huge blowout sale on something that we use regularly, I won't be able to take advantage of the sale. With a credit card, I can snap up the good deal which saves me money in the long run.

Where do I get the funds to pay the bill when it comes? It comes out of savings and current income. The tremendous benefit of choosing to live below our means is that there is always a surplus of funds. We always have a few thousand dollars extra in our checking account and that's above and beyond our scheduled savings, Roths, 529, etc.

[jpg7n16]

Originally Posted by disneysteve

Actually you aren't agreeing with me. I do the same thing as wincrasher.

The point isn't that we spend money we don't have. The point is that we have the money but just don't carry it with us.

Where do I get the funds to pay the bill when it comes? It comes out of savings and current income.

Then maybe I misunderstood - when someone tells me that they don't have it in cash or in checking, to me that means "well, I don't have it yet, but I get paid in two weeks and I'll have it then" or "I need to sell some investments to cover it."

As stated earlier, I too don't carry cash, virtually ever. I never have it with me - but I always have enough in my bank account for whatever I'm buying on my CC. Simply pay off the card after I purchase.

I must have just misunderstood what you guys were saying. Oh well

[disneysteve]

Originally Posted by jpg7n16

Then maybe I misunderstood - when someone tells me that they don't have it in cash or in checking, to me that means "well, I don't have it yet, but I get paid in two weeks and I'll have it then" or "I need to sell some investments to cover it."

I occasionally use my credit card to make charges that exceed our checking account balance, usually when booking vacations and such, so a debit card wouldn't work. That isn't because we don't have the money, though, but rather that the money isn't all in the same place. Between the time I make the charge and have to pay the bill, I will transfer money from a money market account to cover the bill.

[Mr Tipps]

Originally Posted by disneysteve

I hear this all the time and really question how they arrived at that number.

If I go to the gas station to fill my tank, I'm going to spend the same amount no matter how I pay, cash or credit. If I go out to dinner, my meal will be the same price no matter how I pay, cash or credit. If I pay my auto insurance bill, the premium is the same no matter how I pay, cash or credit. The same goes for my cell phone bill, the cable bill, a hotel stay, a magazine subscription, a continuing education course or a new pair of shoes. It costs what it costs.

Paying by credit, which I do for all of the above and more, in no way affects what I spend. I don't buy anything or spend anything I wasn't already going to buy or spend just because I'm paying with a credit card. I just don't comprehend how others do that.

I couldn't agree more with you Steve!! We live off our credit cards and have been doing so for years. Unfortunately some people have no discipline and it is easier to blame the money hungry credit card providers, rather than take responsibility for their own spending. If you can't afford it - don't buy it!! Not a hard concept!

[Bades]

Originally Posted by jpg7n16

I think this is the problem here. A faulty premise.

Some people can handle CCs, others can't. Some people can handle alcohol, some can't. Some can control themselves at a casino, some can't.

Does that mean that if you can control yourself with alcohol consumption, you are obligated to drink? No. Am I going to berate someone for forgoing all alcohol or gambling because they don't want to tempt themselves with destruction? Nope. That's their choice.

Likewise, does that mean if someone has the control to handle their debt, they are obligated to use CCs? Nope. And if someone wants to forgo all CCs because they don't want to risk financial destruction, then best of luck to them. Maybe they've seen their loved ones struggle and just want to avoid it in the first place. (You can make a lot of parallels there)



For the record, I use CCs, I like getting 5% back on gas, I don't drink alcohol, and I gamble periodically. All of which I feel are done responsibly

I'm not hounding my buddy for having the discipline to be able to handle a CC but chooses not to. Im more or less speaking of his lack of knowledge of how credit works and how it can benefit down the road with getting approved for loans and mortgages.

I too have paid 0 credit card interest and love getting rewards back. On avg $100 a month! That pays the cable bill, hell that's like having free cable all the time.

If you're going to spend $1000 a month why not do it on a CC, build credit, and receive rewards! The way I see it, IF you are financially responsible, I do not see any reason why you shouldn't be using a CC.

[Bades]

CC rewards are tax free too

Poster with $4,000 in rewards...great job, tax free money!

[photo]

Originally Posted by Bades

The way I see it, IF you are financially responsible, I do not see any reason why you shouldn't be using a CC.

The problem is that there may be other reasons you may not be aware of, and ultimately, people must make their own choices, even if we don't understand or agree with them.

[YLTL_Dan]

When I was out of control with my money, credit cards were the bain of my existence. They allowed me to spend money I didn't have and rack up debts.

I took control of my money thanks in part to more discipline and cash. I've never been able to find the original Dunn and Bradstreet study that shows we spend 16-18% less when using cash; I think most people have heard that from Dave Ramsey.

However, here are some interesting study results:

For some of us, there may be a strong psychological reason that motivates us away from cash and toward plastic.

George Lowenstein, professor of Economics and Psychology at Carnegie Mellon University, has done extensive research on this psychological connection. People experience what my research collaborators and I call a pain of paying when they pay for purchases and this pain is more intense with cash than with cards. Paying with cards is more carefree, he said.

Lowenstein said that the downside of the ease of spending with credit and, to a lesser extent debit cards, is that the diminished pain of paying encourages overspending and almost certainly increases the likelihood of going into debt. Very few people who end up with a $5,000 balance on their credit card at the end of a year would have agreed to take out a $5,000 loan at the beginning of the year to fund miscellaneous expenses.

Joe Priester is an associate professor of Marketing at the USC Marshall School of Business and the former president of the Society for Consumer Psychology. Priester said, Money is not as psychologically real when it is in the form of credit, so it is easier to spend more, especially on unplanned and/or impulse purchases. There is even evidence that we spend more money when merely presented with credit card logos when entering a store or at checkout. In a way, credit cards prime our spending, often on an unconscious level.

[disneysteve]

Originally Posted by jpg7n16

That if the blackjack tables in Vegas start taking credit cards, watch out!

Originally Posted by YLTL_Dan

For some of us, there may be a strong psychological reason that motivates us away from cash and toward plastic.

People experience what my research collaborators and I call a pain of paying when they pay for purchases and this pain is more intense with cash than with cards.

I understand all of that but just want to point out again that not all of us fit that description. I am the exact opposite of what that person describes. To me, I have much more "pain of paying" when I use a credit card because I know doing so has consequences - a bill will come in a few weeks that will need to be paid. Paying with cash has no consequences - once it's gone, it's gone. End of story.

The reason I included jpg's post above is to speak to this point. I enjoy going to the casino and do it fairly regularly. I always use cash to play and keep a certain amount on hand for just that purpose. If, however, I had to hand over my credit card when I played, I'd probably stop going entirely. I don't think I could stand having all of those charges show up on my bill later.

I guess my brain is just wired differently but I'm much, much more careful with my spending when I use my credit card than when I use cash because I know there will be a bill to pay later.

[YLTL_Dan]

Originally Posted by disneysteve

I guess my brain is just wired differently but I'm much, much more careful with my spending when I use my credit card than when I use cash because I know there will be a bill to pay later.

DS - I'm the same way now, I don't like using credit cards for some purchases because I know I'll see it again when I pay the bill.

For me, it took a negative event to program my brain to feel that way. If you're smart/lucky enough, you'll complete that internal programming before you have the bad event!

[disneysteve]

Originally Posted by YLTL_Dan

I don't like using credit cards for some purchases because I know I'll see it again when I pay the bill.

That's a great way to put it. It is almost like you feel you're spending the money twice where if I pay cash, I'm only spending it once.

The other thing is that when I keep track of our finances, I don't include cash on hand on the spreadsheet. So if I have $500 in my wallet and $5,000 in my checking account, my spreadsheet says I have $5,000, not $5,500. The cash is already "gone" essentially.

[Bades]

Good points about tracking expenses too.

Im not sure how I could do this if I used only cash - I'd have to keep all my receipts and then log them into excel - what a pain in the butt.

Since 99.9% of my purchases are CC and debit - I have a fast and easy way to look at how I spend everything (for me, mint.com)

Unless your super dedicated to inputting receipts into excel at the end of the day - I would think people who use CC's have a better understanding of what they're spending money on.

[disneysteve]

Originally Posted by Bades

Unless your super dedicated to inputting receipts into excel at the end of the day - I would think people who use CC's have a better understanding of what they're spending money on.

Some credit cards, like Chase, even give you a year-end summary of charges broken down by category: dining, auto, travel, etc.

[PauletteGoddard]

I'm not so against credit cards as I am against the Too Pig to Fail (TPTF) banks that issue them, or more exactly, buy credit card issuing companies then change the terms and conditions agreements regularly to make them increasingly anti-consumer.

Here's how one credit user, who pays in full each month the statement balance, and has a credit score somewhere between 780-790 is treated by both a credit union and a TPTF bank, with her credit cards:

Credit union credit card, issued in 2003: best rate credit union offers, credit limit increases with review. 23 day grace period, 1% transaction fee on cash advances, up to $10.

Bank issued credit card, issued in 2000: first it was 25 day grace period, then the TPTF bank bought the company and made it 20 day grace period, eliminated 0% transaction fee on cash advances, made it 4%, removed the cap. Recently restricted % of amount allowed for cash advances to 30% of total credit limit. CONGRESS, not the repeated attempts of the credit card user, made the TPTF bank restore grace period to 25 days. It's an affinity card, so rate is variable 12.99%.

The credit card terms and conditions I agreed to when I first got the card in 2000 shouldn't worsen if credit history and activity have only lengthened and strengthened, but they did.

[Bades]

If you pay your card off in full every month and there is no annual fee, what do the terms and conditions really even mean in the end? I get letters every now and then about interests rates changing...I don't care, it doesn't mean a thing to me.

[disneysteve]

Originally Posted by Bades

If you pay your card off in full every month and there is no annual fee, what do the terms and conditions really even mean in the end? I get letters every now and then about interests rates changing...I don't care, it doesn't mean a thing to me.

The interest rate shouldn't matter because you shouldn't carry a balance. The cash advance fee shouldn't matter because you shouldn't take cash advances. The grace period is important because the shorter it is, the easier it becomes to accidentally make a late payment. The companies know that if they shorten the grace period, their late fee revenue will skyrocket.