Why are some so against credit cards?

[Bades]

I was out to lunch with a buddy of mine and we got to talking about credit cards and how my rewards really paid off in the month of December

We are 24 years old, and he told me he's never had a credit card and still doesn't. I've told him many times the importance of building up credit and the rewards alone I get back make it worth it (when someone will give you hundreds of dollars a year for free...you take it!).

I know several friends in this situation, what is it about people that don't take an interest in their financial well-being? My buddy also recently tried to apply for a credit card and got denied! duh, not sure where this sense of self-pride comes from for not having a credit card??

[Bades]

And for the record I'm talking responsible people with capacity to control their money and pay it off.

[bjl584]

Credit cards are just a financial tool. You can be irresponsible with them or you can be responsible with them.

Some people shouldn't have credit cards for that reason. I'm not sure of your friend's financial picture, but maybe he is better off not having access to credit.

[Bades]

I agree with but I added to the fact that Im speaking of responsible people. I know some shouldnt get anywhere near a card.

[Slug]

In contrast to your title it seems like you're against NOT having a card, but your buddy seems quite satisfied with his current existence. I long since stopped trying to convert people who don't have an interest in being converted.

[GREENBACK]

Originally Posted by Slug

I long since stopped trying to convert people who don't have an interest in being converted.

I've never thought to try to convince anyone of the value of a CC. We all handle our finances in the way that best suits us and for some a CC isn't the way to go. It's a simple way to build credit when you're young but impulsive spending can quickly derail your plans. I say to each his own. I use them extensively and have for almost 30 yrs. with no problems. It takes financial discipline though when you go this route.

[dczech09]

Credit cards are a financial tool just like a debt card. Some people use CCs for daily transactions, others use debit, and others use cash. Quite frankly CCs have certainly become a valid way to facilitate transactions, but there are still some moral hazard associated with using OPM (other people's money).

Personally, I use credit cards for my business trips that my employer reimburses, but aside from that it stays in my wallet.

I did spend a good 6 months using a credit card for everything and paying it off as I went. I did not see much of a change in my spending behavior since I always stick to my budget regardless of anything.

Statistics say that people spend about 18% more when using credit cards, but I think that is regarding people who use it without a plan in place.

Credit card useage is fine, but credit card debt is bad. Also I don't think people should chase rewards on credit cards. Put it this way, the CC company did not set up that reward program to lose money.

[dczech09]

Just a quick addition:

If a credit card is too much of a temptation, then do not use it. There are many people for whom a credit card is way too much of a temptation. Those people should avoid them like the plague.

[ActYourWage]

Originally Posted by dczech09

Credit cards are a financial tool just like a debt card. Some people use CCs for daily transactions, others use debit, and others use cash. Quite frankly CCs have certainly become a valid way to facilitate transactions, but there are still some moral hazard associated with using OPM (other people's money).

Personally, I use credit cards for my business trips that my employer reimburses, but aside from that it stays in my wallet.

I did spend a good 6 months using a credit card for everything and paying it off as I went. I did not see much of a change in my spending behavior since I always stick to my budget regardless of anything.

Statistics say that people spend about 18% more when using credit cards, but I think that is regarding people who use it without a plan in place.

Credit card useage is fine, but credit card debt is bad. Also I don't think people should chase rewards on credit cards. Put it this way, the CC company did not set up that reward program to lose money.

Well said.

[maat55]

[quote]

Originally Posted by dczech09

Statistics say that people spend about 18% more when using credit cards, but I think that is regarding people who use it without a plan in place.

Very good point. Some people will justify over-spending for rewards. You are neither saving nor earning with a credit card if you are not using it for specific purposes.

I never use mine for anything but business expenses, gas and listed groceries. The important thing is to spend the least possible and then consider rewards.

[bjl584]

Originally Posted by Bades

I agree with but I added to the fact that Im speaking of responsible people. I know some shouldnt get anywhere near a card.

Well if your friend is responsible financially speaking, and he manages to make do without credit cards, then more power to him. Without owning a credit card he may have trouble with things like booking flights and hotels, and buying things online, but if he is content, then good for him.

[Slug]

Originally Posted by dczech09

.

Statistics say that people spend about 18% more when using credit cards, but I think that is regarding people who use it without a plan in place.

I'm always dubious of these statistics. Will you provide a link to the full research article that supports your claim?

[disneysteve]

Originally Posted by dczech09

Statistics say that people spend about 18% more when using credit cards

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.

[bjl584]

Originally Posted by disneysteve

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.

Not everyone thinks about money the way that you do Steve.

Seriously though, I've heard that same thing about people spending more when they have credit, and I can definitely see it happening. From my years working in retail I've witnessed countless people buy things that they could not otherwise afford. They would open store credit cards just to be able to make a purchase. I'm not sure if the 18% statistic is accurate, but I do see people buy things that they can't afford all the time.

[disneysteve]

Originally Posted by bjl584

I do see people buy things that they can't afford all the time.

I agree, but I've seen it with cash and credit.

At one of my wife's former jobs, she always used to tell me about her coworkers. They would rush to the bank on their lunch break on pay day to cash their checks so that they could "afford" to go out and buy lunch, which they did every day. They had literally spent all of their money prior to that. They would also frequent the soda and vending machines in the break room and talk about where they went out to eat the night before or which club they went to last weekend.

They didn't understand why my wife, who packed her lunch daily and brought her own soda, never had to run out to cash her check. If fact, she had direct deposit and didn't cash her check at all. Half the time, she didn't even know it was pay day.

If people are going to overspend, they're going to do it with cash, debit or credit.

[ActYourWage]

Originally Posted by disneysteve

If people are going to overspend, they're going to do it with cash, debit or credit.

True, but it is easier to swipe that debit/credit card at McDonalds or buy that pack of gum at the convenience store when you don't have cash. Some call it impulse buying and that is easier to do when you don't have cash. Just put it on the card and worry about your finanical issues later. I fully agree with the 18% statistic.

For example purposes only, say someone goes into McDonalds. They don't have cash, but do have a debit/credit card. All they want is a cheeseburger and drink from the dollar menu. The total is at $2.xx, then the server asks if they would like to add 2 apple pies for only $1. The buyer says, why not and buys the "up-sale". The total increases to $3.xx and they just spent around 45% more on that one purchase.

In regards to the statistic, we are talking averages of how people spend, not the typical SavingAdvice forum member.

[disneysteve]

Originally Posted by ActYourWage

For example purposes only, say someone goes into McDonalds. They don't have cash, but do have a debit/credit card. All they want is a cheeseburger and drink from the dollar menu. The total is at $2.xx, then the server asks if they would like to add 2 apple pies for only $1. The buyer says, why not

That's exactly what I don't understand. If I walk into McDonald's (not that that would ever happen) just for a cheeseburger, I wouldn't buy an apple pie - cash, credit, debit, check or otherwise. And if I did happen to want an apple pie, I'd buy one regardless of the form of payment.

Of course, that also explains why I wear the same size pants I wore in high school 30 years ago.

[bjl584]

Originally Posted by disneysteve

I agree, but I've seen it with cash and credit.

At one of my wife's former jobs, she always used to tell me about her coworkers. They would rush to the bank on their lunch break on pay day to cash their checks so that they could "afford" to go out and buy lunch, which they did every day. They had literally spent all of their money prior to that. They would also frequent the soda and vending machines in the break room and talk about where they went out to eat the night before or which club they went to last weekend.

They didn't understand why my wife, who packed her lunch daily and brought her own soda, never had to run out to cash her check. If fact, she had direct deposit and didn't cash her check at all. Half the time, she didn't even know it was pay day.

If people are going to overspend, they're going to do it with cash, debit or credit.

A few weeks ago a woman came up to the counter and said, "I want a Playstation 3. Ours broke last night." So I unlocked a new one for her from the case. She then said, "My husband was upset cause we didn't have any money to buy a new one. But I told him that we have a credit card. Just give me the card and I will go get a new Playstation." So there she was buying a $300 gaming system with a credit card becasue her and her husband couldn't afford it any other way. She didn't have the cash to do it. She didn't have enough in her checking account to do it. But, with a credit card it was a simple swipe on the card reader. So, while only a single example of people using credit irresponsibly, it does happen. Paying $20 a month for something for the next year or two sounds more appealing to some people than forking over $300 all at once.

BTW, there are plenty of people here at my work that can't wait till payday either. So, yes, I agree that overspending can take many forms.

[feh]

We got $350 back for the 2011 calendar year using our CC, and we didn't pay a cent of interest.

Pretty good deal, IMO.

[disneysteve]

Originally Posted by bjl584

A few weeks ago a woman came up to the counter and said, "I want a Playstation 3. Ours broke last night." So I unlocked a new one for her from the case. She then said, "My husband was upset cause we didn't have any money to buy a new one. But I told him that we have a credit card. Just give me the card and I will go get a new Playstation." So there she was buying a $300 gaming system with a credit card becasue her and her husband couldn't afford it any other way.

I certainly wasn't denying that it happens. It just boggles my mind. I can't comprehend what goes through a person's head that allows them to buy something when they have no money. That is just a huge disconnect in my mind. Do they not understand that the credit card doesn't actually pay for the item? Do they not understand that a bill will come in a few weeks? Maybe it's a genetic defect.