Why I'm not a Ramseyite

[Nutria]

I'm now more convinced than ever that you work for a credit card company.

You found me out. I actually work for Wells Fargo, and personally created thousands of CC accounts, so as to financially sink people, while lining my own pocket!!!!

[disneysteve]

I'm now more convinced than ever that you work for a credit card company.

I agree 100% with everything Nutria posted. Do I work for the CCs too?

I'm not sure what would possibly make you think that. Credit cards are just another form of payment. What's the difference if I hand the cashier a debit card (which I've never done) and the money comes straight out of my checking account or I hand over a credit card and then pay the credit card company out of my checking account? Either way, I've spent the same amount. The only difference is that with the credit card, I also get added consumer protection and rewards.

[disneysteve]

I think the bottom line is that some people, a relatively small minority, should never have a credit card. They just can't use it responsibly. The analogy to alcohol isn't so bad as there are some people who can't ever be responsible drinkers.

For everyone else, though, credit cards are just a way to pay for stuff. Often, I don't decide how to pay until I'm standing at the register. I might use cash if I happen to have some extra cash on my. I might use a prepaid Visa that I got from doing a survey. Or I might use credit, especially if I'm making a purchase that qualifies for a 5% rewards bonus at the moment. Money is money. I'll use the method that is most convenient and advantageous to me at the moment.

[snafu]

Not yet mentioned, vendors pay between 3-4% to credit providers. For larger purchases, ask if there is a discount to pay cash. I have the impression vendors know you'll buy the higher priced item or spend more with CC than when paying cash. I wonder if at least 1/3 of restaurants would be out of business if they insisted in cash only.

For those like Simon, I wonder how they book flights hotels and car rentals without a CC,

[disneysteve]

Not yet mentioned, vendors pay between 3-4% to credit providers. For larger purchases, ask if there is a discount to pay cash.

The only place I've definitely seen this is with furniture, but they often even advertise it. The ad will say 0% interest for 5 years but the small print will say 10% discount for cash purchases. As we've said before, "free" financing is never really free.

For day to day purchases, it doesn't matter though. Target or the supermarket will not give me a discount for using cash. In fact, Target actually gives a 5% discount if you get their card.

The best deal is the discounted gift cards I've posted about. I can use my rewards credit card to buy a discounted gift card to save even more money.

For those like Simon, I wonder how they book flights hotels and car rentals without a CC,

Some places let you use a debit card but some don't.

[Nutria]

I think the bottom line is that some people, a relatively small minority, should never have a credit card. They just can't use it responsibly. The analogy to alcohol isn't so bad as there are some people who can't ever be responsible drinkers.

It is true, though, that many people drink way too much alcohol even though they aren't alcoholics (all my friends do it, I'm bored/lonely/self-medicating, etc).

The difference between them, though, and alcoholics is that they can train themselves to drink without abuse rather than having to cut it off completely like alcoholics.

[AJSimon]

I agree 100% with everything Nutria posted. Do I work for the CCs too?

I honestly don't know. If I put the question to you directly (as I did to him), would you answer it with a simple yes or no, or would you give me an evasive response ("Did I quote an industry source?" - as though that meant something) or a glib "confession" that I suppose passes for wit in some circles?

You can agree with him 100% or not at all, but in either case, you don't strike me as someone who's entering this conversation with an activist pro-credit card agenda. Nutria very much does. The bald rancor he appears to hold for Dave Ramsey, a guy who hosts a radio show he doesn't even listen to, doesn't come across as strictly rational. Unless, of course, he actually has some sort of professional stake in this debate.

Which would be fine, by the way. Nutria could actually be Ken Chenault posting, for all I care. But for the purposes of discussions like these, I hope you'd at least agree that it actually matters whether he works for a credit card company or not. Or put it this way - if you found out *I* was Ken Chenault, basically agreeing with Dave Ramsey that credit cards don't make sense as a financial instrument, that would be a bit more relevant in your evaluation of my views on the subject, would it not?

I'm not sure what would possibly make you think that. Credit cards are just another form of payment. What's the difference if I hand the cashier a debit card (which I've never done) and the money comes straight out of my checking account or I hand over a credit card and then pay the credit card company out of my checking account? Either way, I've spent the same amount. The only difference is that with the credit card, I also get added consumer protection and rewards.

With the new EMV cards, whatever consumer protection gap that ever existed between the credit card companies and the bank you'd have to deal with if someone actually got your pin and committed fraud, is closing fast. As for the rewards, without knowing the specifics of your situation, I can only address this broadly. Multiple studies show that people spend more money when they use a credit card than when they use a debit card than when they use cash. And of course, virtually 100% of credit card users imagine themselves to be the exception to that rule. Whatever is actually true about you, the credit card companies are well aware of what the data shows. The "rewards" of credit card usage exist as an incentive to get you to use the cards. They don't build any significant wealth in themselves.

Again, maybe you're really as disciplined about this as you claim to be, and if we actually did a full accounting of your situation, we'd find that you actually did come out slightly ahead. But basically everyone who pays their bill on time would probably say that about themselves - because none of them are willing or able to factor in how much less they would have spent had the money been coming directly out of their checking account in the first place.

[disneysteve]

could actually be Ken Chenault

I have no idea who that is but I'll look it up. I'm guessing he's somebody in the industry.

As for the rewards, without knowing the specifics of your situation, I can only address this broadly. Multiple studies show that people spend more money when they use a credit card than when they use a debit card than when they use cash.

We've all seen that study. We talk about it here from time to time. I have no doubt that it's true for some and not true for others. I know there's the McDonald's data showing their average tab went up when they started taking cards, but I think that's skewed because I suspect their average demographic tilts toward lower income folks who are less likely to be responsible with their money.

Most of our personal credit card charges are for things we would be paying/buying no matter what: gas, cell phone, home phone, cable, internet, alarm monitoring, auto insurance, professional licenses and memberships, auto registration, auto maintenance, home repairs, medical bills, etc. The price is what the price is no matter how we choose to pay - cash, check, debit, or credit. We aren't hitting the mall every weekend and loading our closets with clothes and shoes we don't need. We do go out to eat occasionally but I never think about how I'm going to pay when deciding what to order. And I would never walk out of my house without a couple hundred dollars in my wallet so that would never be a limiting factor.

[AJSimon]

I have no idea who that is but I'll look it up. I'm guessing he's somebody in the industry.

He's the CEO of American Express.

We've all seen that study. We talk about it here from time to time. I have no doubt that it's true for some and not true for others. I know there's the McDonald's data showing their average tab went up when they started taking cards, but I think that's skewed because I suspect their average demographic tilts toward lower income folks who are less likely to be responsible with their money.

Most of our personal credit card charges are for things we would be paying/buying no matter what: gas, cell phone, home phone, cable, internet, alarm monitoring, auto insurance, professional licenses and memberships, auto registration, auto maintenance, home repairs, medical bills, etc. The price is what the price is no matter how we choose to pay - cash, check, debit, or credit. We aren't hitting the mall every weekend and loading our closets with clothes and shoes we don't need. We do go out to eat occasionally but I never think about how I'm going to pay when deciding what to order. And I would never walk out of my house without a couple hundred dollars in my wallet so that would never be a limiting factor.

Fair enough - then you may well be the exception to the general rule. Ultimately, you'd have to be - because if more people were like you, credit card companies wouldn't exist.

[Nutria]

The "rewards" of credit card usage exist as an incentive to get you to use the cards.

• Rewards are the cherry on top of the icing on the cake which is desert.
• Be the fish that nibbles the bait off the hook instead of being the fish that swallows the bait whole.

because none of them are willing or able to factor in how much less they would have spent had the money been coming directly out of their checking account in the first place.

You discount the possibility that people who use CCs can also have -- and follow -- a balanced budget.

[disneysteve]

if more people were like you, credit card companies wouldn't exist.

I don't think that's true. CC companies collect 3% merchant fees on every transaction. Even if every customer paid their bill in full and on time every month, they'd still be collecting those merchant fees. The business wouldn't be as lucrative but it wouldn't go away. Rewards might become less generous. I mean Discover can't give me 5% cash back if they're only making 3% on the usage. But there would still be plenty of money to be made. I can't find a number for how much is charged to credit cards each year but it has to be in the billions or trillions. Let's just say it's $1 trillion. Even if all they get is 3% of that, that's still $30 billion/year in income.

Then there are things like annual fees that even very responsible users pay. I pay one annual fee myself but I feel it's well worth it for the benefits the card provides us.

[Nutria]

With the new EMV cards, whatever consumer protection gap that ever existed between the credit card companies and the bank you'd have to deal with if someone actually got your pin and committed fraud, is closing fast.

I'll cross that bridge when I come to it.

[Nutria]

He's the CEO of American Express.

The funny thing is that, for the longest time, AmEx only issued charge/travel cards.

[disneysteve]

The funny thing is that, for the longest time, AmEx only issued charge/travel cards.

I was thinking that too. AmEx really built their brand on cards that required you to pay your bill every month, so clearly there was money to be made there.

[Nutria]

AmEx really built their brand on cards that required you to pay your bill every month, so clearly there was money to be made there.

But not as much as in luring people to their potential doom. (That's true in so many areas, though.)