Credit cards vs. Debit Cards

[littleroc02us]

What risk?



Here's my problem with your argument.

You say, a cash purchaser would pay cash - have no risk, be totally okay if he lost his job, and since he buys with cash, he will never make impulse purchases and therefore be in good shape.

But a CC user - is super risky, is in danger of losing his job, has more debt, and is liable to blow through all his cash immediately before losing his job.

So therefore it's obv better to buy with cash than a CC, because the CC is soo risky! (though you never say what risk)


You never evaluate the effects of the same events happening to both, it's always sunny for your preferred method and tragic for the option you're against.


So yes, there are variables, but a fair example only changes one variable at a time. Like:

Say there was a $5000 purchse and two buyers had $10,000 in cash. One bought with cash, the other on his credit card (to earn rewards) planning to pay it off at the end of the month. After the purchase the cash buyer would have $5000 cash and no debt. The CC user would still have $10,000 cash and have a new debt of $5000 (min payment of $50/month). {everything is identical except the one variable: method of purchase}

Who is in a better position to weather suddenly losing a job?

IMO it's the one with the most cash on hand - which would be the CC user. The debt can be repaid over time, but as they have no income, they wouldn't qualify for any lines of credit if they ran out of cash.

So are you to go on the record to say that debt doesn't have risk? You would be the first I think?

[littleroc02us]

I'm no financial expert, but aren't these risks only risks if you are irresponsible with a CC? Are there no risks associated with irresponsible use of a DC? I guess what I'm thinking is that regardless of which card you use, it goes back to personal responsibility.

That makes it a risk doesn't it. The definition of risk is: the degree of probability of such loss.

[JoshuaHeckathorn]

Again wrong, because the credit card user could have been someone that was expecting the money to come in on his next paycheck and then got laid off or he lives paycheck to paycheck and doesn't save money and something else comes up, so now he cannot pay his bill. Happens all the time with people.

Correction...happens all the time with "irresponsible" people.

[jpg7n16]

What risk?

-late payment fees I won't get late fees cause I've got extra cash on hand to pay on time - cash that the cash buyer lost when he made the purchase
-over the limit fees I wasn't over the limit, and have extra cash to pay down under the limit if needed
-Interest if the bill isn't paid This isn't a risk, it's the nature of borrowing. Interest is certain
-raising of the % rate I can transfer my balance for X months at 0% or pay it off with my extra cash if they decide to hike my rate
-changing of graces periods I don't need grace periods because I have extra cash on hand to pay on time
-Possibly damaging credit report if late on payments I won't be late because I have extra cash on hand to pay on time

*These are in the terms of the agreement with the credit card.

So what risk again?


I think happygirl was right on - there are costs to being financially irresponsible - but those aren't tied solely to CC users. What if a cash buyer pays his mortgage late? Won't he get late payments too? What if he's late on his insurance premiums? Won't he run the risk of being in an accident without coverage?

MM, Coronet, Greenback and others are trying to make the point that you can use CC's responsibly and not be at any additional risk. And I agree with them.

[happygirl]

What risk?

-late payment fees
-over the limit fees
-Interest if the bill isn't paid
-raising of the % rate
-changing of graces periods
-Possibly damaging credit report if late on payments

*These are in the terms of the agreement with the credit card.

I'm no financial expert, but aren't these risks only risks if you are irresponsible with a CC? Are there no risks associated with irresponsible use of a DC? I guess what I'm thinking is that regardless of which card you use, it goes back to personal responsibility.

[littleroc02us]

What risk?

-late payment fees
-over the limit fees
-Interest if the bill isn't paid
-raising of the % rate
-changing of graces periods
-Possibly damaging credit report if late on payments

*These are in the terms of the agreement with the credit card.

[GREENBACK]

I can post visa's agreement for credit card use for everyone to see, it has a whole lot of what if's like late fees, over the limit fees, etc.. IMO those are some of the risks.

Or you could post a typical installment loan agreement or any other contract with a bank. A CC is like anything else a bank issues. We all know that banks look to make a buck any way they can and will if you let them. You assume no risk if you insulate yourself from the hazards that are part of the contract.

If I had a car loan and got several months behind on payments I'd fully expect serious repercussions from the lender like losing my ride. Same with CC's minus the collateral. No collateral means they need other ways to ensure collection or compensation for their "loan".

We assume risk with any bank loan and a CC is no different but is much easier to deal with if handled intelligently. I'm not a big fan of banks but I get why they manage CC accounts the way they do.

[jpg7n16]

The difference is risk! You have to assume risk everytime when using CC's.

What risk?

The point is that if you simply state that using cc's that there is debt and if you use cash there isn't. What happens after that is all variables. You can't argue that point.

Here's my problem with your argument.

You say, a cash purchaser would pay cash - have no risk, be totally okay if he lost his job, and since he buys with cash, he will never make impulse purchases and therefore be in good shape.

But a CC user - is super risky, is in danger of losing his job, has more debt, and is liable to blow through all his cash immediately before losing his job.

So therefore it's obv better to buy with cash than a CC, because the CC is soo risky! (though you never say what risk)


You never evaluate the effects of the same events happening to both, it's always sunny for your preferred method and tragic for the option you're against.


So yes, there are variables, but a fair example only changes one variable at a time. Like:

Say there was a $5000 purchse and two buyers had $10,000 in cash. One bought with cash, the other on his credit card (to earn rewards) planning to pay it off at the end of the month. After the purchase the cash buyer would have $5000 cash and no debt. The CC user would still have $10,000 cash and have a new debt of $5000 (min payment of $50/month). {everything is identical except the one variable: method of purchase}

Who is in a better position to weather suddenly losing a job?

IMO it's the one with the most cash on hand - which would be the CC user. The debt can be repaid over time, but as they have no income, they wouldn't qualify for any lines of credit if they ran out of cash.

[littleroc02us]

As a responsible CC user you would certainly have a sizable EF in place to handle a situation like this. If I had zero income tomorrow I could easily pay off my CC's. People in a paycheck to paycheck position shouldn't be using a CC to begin with.

CC's are for financially responsible folks and it actually goes beyond the ability to pay it off from month to month, IMO. The financially responsible CC user who has his house in order has no risk that can't be handled in an emergency.

I understand that responsible people rely on credit cards for everything, but again I don't want to assume the risk. I can post visa's agreement for credit card use for everyone to see, it has a whole lot of what if's like late fees, over the limit fees, etc.. IMO those are some of the risks.

[littleroc02us]

What if the cash payer took his cash and spent it on something frivolous? Then he also wouldn't have cash for food.

You like to create scenarios that assume your solution always does everything perfect, while the scenario you're against gets these odd requirements, or scenarios that only affect the side you're against.


There is no difference between a person who has $3000 cash, buys $400 on a credit card to build up rewards, then pays $400 of his cash to the credit card - and a person who has $3000 cash and buys stuff with $400 cash. (except that the CC user gets rewards, and the cash one doesn't)

The difference is risk! You have to assume risk everytime when using CC's.

At the end of the month, each has $2600 in cash and no debt.

But if you want to say 'well the CC user might spend the cash on frivolous stuff instead' why don't you say that the Cash user might spend his cash on frivolous stuff too?? Answer: because it doesn't make your argument look as good.


If I just lost my job, I would rather have $15k in cash with $10k in debt, than have $5k in cash with no lines of credit (remember I lost my job, so no one will lend to me). Debt can be paid off over time in small amounts. Food has to be bought today.



The point is that if you simply state that using cc's that there is debt and if you use cash there isn't. What happens after that is all variables. You can't argue that point.

[GREENBACK]

Again wrong, because the credit card user could have been someone that was expecting the money to come in on his next paycheck and then got laid off or he lives paycheck to paycheck and doesn't save money and something else comes up, so now he cannot pay his bill. Happens all the time with people.

As a responsible CC user you would certainly have a sizable EF in place to handle a situation like this. If I had zero income tomorrow I could easily pay off my CC's. People in a paycheck to paycheck position shouldn't be using a CC to begin with.

CC's are for financially responsible folks and it actually goes beyond the ability to pay it off from month to month, IMO. The financially responsible CC user who has his house in order has no risk that can't be handled in an emergency.

[jpg7n16]

Actually it does, because what if you took the money that you would have used to pay off the cc on something frivilous and then lost your job and had no other money to use to pay off the debt? The cash payer wouldn't have that problem. What you do isn't what everyone else does.

What if the cash payer took his cash and spent it on something frivolous? Then he also wouldn't have cash for food.

You like to create scenarios that assume your solution always does everything perfect, while the scenario you're against gets these odd requirements, or scenarios that only affect the side you're against.


There is no difference between a person who has $3000 cash, buys $400 on a credit card to build up rewards, then pays $400 of his cash to the credit card - and a person who has $3000 cash and buys stuff with $400 cash. (except that the CC user gets rewards, and the cash one doesn't)

At the end of the month, each has $2600 in cash and no debt.

But if you want to say 'well the CC user might spend the cash on frivolous stuff instead' why don't you say that the Cash user might spend his cash on frivolous stuff too?? Answer: because it doesn't make your argument look as good.


If I just lost my job, I would rather have $15k in cash with $10k in debt, than have $5k in cash with no lines of credit (remember I lost my job, so no one will lend to me). Debt can be paid off over time in small amounts. Food has to be bought today.

[littleroc02us]

The credit card user wouldn't be in any more trouble. I, like the others that support responsible credit card use here, only buy in a given month what we already have the cash to pay for when the bill is due.

The only difference would be that the cash would be in my bank account longer than the person that paid cash up front. The credit card user still wins.

Again wrong, because the credit card user could have been someone that was expecting the money to come in on his next paycheck and then got laid off or he lives paycheck to paycheck and doesn't save money and something else comes up, so now he cannot pay his bill. Happens all the time with people.

[littleroc02us]

^ If you pay it off in full each month (i.e. already have the cash sitting in your bank account BEFORE you charge something so it immediately gets paid off) your argument doesn't work. I only charge what I have so even if I lost my job today I could still pay off my cc.

Actually it does, because what if you took the money that you would have used to pay off the cc on something frivilous and then lost your job and had no other money to use to pay off the debt? The cash payer wouldn't have that problem. What you do isn't what everyone else does.

[Coronet]

^ If you pay it off in full each month (i.e. already have the cash sitting in your bank account BEFORE you charge something so it immediately gets paid off) your argument doesn't work. I only charge what I have so even if I lost my job today I could still pay off my cc.