I know credit cards tend to be a controversial issue around here, and I’m probably opening up a can of worms in posting this, but reader Aimee sent over this article from Smart Money called “10 Reasons I’m Canceling My Credit Cards” this morning. I read it and loved it — especially since it had some points you don’t often see made in articles on why you should stop using credit cards.
I’d encourage everyone to take the time to read this article and consider the points made. You may not agree with it, but I hope it causes you to think about why you’ve chosen to use credit cards or why you’ve chosen not to use them.
Here’s a snippet:
The dollar bill needs you.
A growing number of merchants won’t accept cash anymore. That includes a lot of airlines, which insist you pay by credit card if you want to buy a drink or a sandwich on board. And now comes news that the U.S. Treasury is printing fewer dollars, as we move towards an all-plastic economy.
Great news for the banks. Great news for the card companies. Great news for the marketing establishment, which can now pore through our transactions and our personal lives in greater and greater detail.
Me? Call me a contrarian, or just call me ornery, but I view this with gloom. This is not a step forward. It’s a step backwards. Personally, I’ve been moving the other way. I’ve cut down on my use of credit cards and debit cards. The latest news is the final push I needed to get them out of my life completely. I’m going all cash.
Read the full article.
I’d love to hear your thoughts on this article. Since this can sometimes be a heated topic, please remember to be cordial in commenting.
Leah says
We use the cash system for any expense that we can “work on keeping down” – groceries, eating out, entertainment, clothes, gifts, etc. For expenses that we MUST pay, and expenses that are tax issues for us, we use the credit card – doctor’s appointments, repairs to our rental properties, and gas (because I can’t NOT drive my kid to school!) So we keep our credit score good, and have the benefit of keeping most expenses low through using the cash system. I’m traveling a lot right now with my boys, and it’s awfully nice to have a credit card to put down for hotels! I end up paying with cash when I check out, but what’s the point in fighting so hard? It’s a credit card, not a cobra! Just keep an eye on your bill for any discrepencies, keeping spending to a minimum, and get on with life!
Angie says
I didn’t have time to read all of these posts, but I wanted to mention that around where I live, I have seen a slight increase in retailers ONLY accepting cash, mostly local restaurants. I don’t have a problem with this since I know the restaurant is trying to avoid the credit card merchant fee.
What I do have a problem with, is the restaurant being cash only, and only mention it right outside the door and consequently the customer doesn’t know this policy until walking into the restaurant. I feel there should be a sign visible from the road so that customers know to come prepared with cash. Most of these cash only restaurants provide an ATM, but usually there is a fee to use it.
As for credit cards, I use the rewards, but have switched to cash for some purchases, like groceries, because I find it easier to stick to my budget that way.
Alaine says
While this article has some good points, I’m definitely not giving up my plastic anytime soon. While many of the points are valid – people spend more money using credit cards, etc – the real issue here is not the cards, it’s the fact that people don’t have the willpower to control their spending, or that they can’t handle budgeting themselves! And if that is the case, then the author is correct, they should be using cash instead of racking up debt and causing themselves a boatload of trouble in the end (isn’t that how our economy got into this mess in the first place?). But I think most of the readers here are much more budget-conscious, and using a debit card or an occasional credit card that is paid off every month isn’t going to be a problem. I can’t imagine the hassle it would be to have a pre-paid card everytime I wanted to make travel arrangements or buy something online. It’s just not worth it! I don’t even think you can rent a car without having a credit card. And like others have posted, having a credit score (a good one) is a necessary evil, so if you ever want to get a mortgage, you need to have at least a couple of cards and use them well. I can’t imagine someone trying to take out a mortgage without ever having a credit card! What really needs to be done, is that kids need to be taking personal finance classes in high school (IMHO, it should be a mandatory requirement!) so that people learn how to use credit cards correctly and learn how to build a credit history without burying themselves in debt.
Angie says
I agree about requiring kids to take personal finance in high school – I always say that too. The concept of interest and compounding interest, and paying and earning interest are easy concepts that a junior high student can understand, yet I never really was aware of these concepts until I got I was in college, and I didn’t understand the impact until after I got out of college.
Sheila says
I have to disagree with the article, I think the benefits of having a credit card far outweigh that of using cash. First, if you pay off the balance every month you are helping to increase your creditworthiness by increasing your credit limits. Therefore, when you go to buy a house or another large purchase you’re more likely to get a better rate in the long run. Second, I pay my balance off every month so I don’t have interest and then I use the credit card points I’ve racked up to cash in for gift cards at Christmastime. I use those to buy gifts or give the gift cards as gifts so I’m actually making money. Third, if you ever have a problem with a transaction, it’s easier to dispute with your credit card company and get your money back than if you paid cash. Fourth, I actually spend less using my credit card. I’m less likely to put a $3 coffee on my credit card. If the transaction isn’t over a specific amount then it just seems silly to charge it so I’ve talked myself out of a lot of small charges because of this and those do rack up over time. Fifth, I wouldn’t ever close out a credit card account. This lowers your credit score. If you have a problem then just cut up the card and don’t use it. Many companies will automatically close the account if it hasn’t been used in a certain amount of time. By that point you’d probably be out of your debt situation anyway. Personally I find cash easier to spend than I do credit cards.
Lea says
I’m sure this won’t be read this far down, but… We’ve been on the CC system for 5 or 6 years now. Charge EVERYTHING and completely pay it off every month. We are both very detail orientated people and so recorded every purchase in our excel budget every month, always have – I can tell you every penny we’ve spent in each of our 12 categories for the entire timeline. That being said our spending did go up in clothing, household, dining and misc when we switched. We do have target amounts for each category and try to keep the spending reasonable, but without a daily ticker we often go over. We’ve always paid it off but we should have been able to save more than we have.
I’m going to talk with my DH tonight about switching just a couple of categories – clothing and eating out – since they fluctuate the most – and see if just maybe using cash only will help us to keep more for later!
Kara says
My husband and I have never had credit cards. I had one before we got married, but my parents were cosigners on it (I got it when I was 16) and asked me to close it when I was 18. We bought a house 2 years ago with no credit. It was a pain to find someone that was even willing to give us a loan. Our interest rate isnt much higher becuase of it, but it took about 3 months to find a lender.
I read somewhere “what if you car breaks and you can afford to fix it and dont have a credit card?” I’m actually in that exact situation right now. And God blessed me with feet, a double stroller and a water bottle. So, anytime we need to go anywhere, my kids and I are walking. It’s good exercise! A broken car seems to save money too. 🙂
The argument that plastic makes you spend more is very true in my life. I have tried a couple times not to use cash, and use my debit card exclusively. Both times, I over spent the budget. And I was really trying to stay on top of it. I do use my debit card for online purchases.
Lynn says
I think what some people don’t realize is that unfortunately an outstanding credit score may have to be a “safety net” someday and the only way to get it is to build it over time. We only have one credit card with our credit union, it has a very high limit, we use it responsibly and pay it off and my husband and I both have credit scores over 830. We also have our e/r savings, etc.
However, in my previous job (before I was a SAHM) I saw many people just like us who had real emergencies and needed their credit card/score for loans to sustain them. While unemployment is certainly devastating for many people, the types of things I saw were far more catastrophic – for example one couple, sadly, had two members of their family (mom and a child) diagnosed with illnesses – even with health insurance, Mom’s long term illness comes with many prescriptions that are several hundred dollars a month out of pocket. The child had cancer and both parents obviously missed a lot of work during treatments, etc. My point is it broke my heart as the father explained that he knew they looked like deadbeats but they had ultimately filed bankruptcy after they went through almost $75K e/r funds, loans from their IRAs, etc taking care of everyone. They had done everything “right” and now were starting over anyway.
I know this is a very extreme example but it is important to realize that part of being responsible is securing your family’s financial future in a number of ways and building credit responsibly can be one piece of the puzzle. It isn’t necessarily just about being able to buy a plane ticket or reserve a hotel room, but there may be a time 20 years from now (hopefully, never if you are so blessed) when you may find that you need you that credit score to help you and it may be too late!
Laurie A says
I switched to the envelope system for groceries and find that I actually THINK about what I’m buying and am less impulsive than when I used the credit card. I stick within the budgeted amount and even challenge myself to see how much I can have left at the end of the month. That being said, though, I’m still trying to get my husband to use the Peter/Paul method and not charge on the rare occasions he goes to Stop and Shop.
Jenny says
Debit card lovers, beware. The laws are aobut to change to put a strict limit on what banks can charge merchants for debit card transactions, and the limits are much lower than what is commonly charged now. I think we are going to see banks start charging consumers for debit card transactions, because we all know the banks are not going to be willing to eat the difference. I’d read any communication you get from your bank about your debit card very carefully for the next year!
Anonymous says
I appreciate all of the input from all. While some don’t agree with others, I prefer to look at it as a great debate rather than a heated conversation.
I check my credit each year and this year my FICO score was 837. I have not worked in 5 years and the amount of credit I have available is still the same as it was when I was working. That takes work. I learned the following things which has helped me to develop a FICO in the upper range. I no longer have a mortgage…that hurt my score. I have a car note and 12 open credit cards. The ratio of one loan and 12 credit cards hurt my score. Previously, I charged everything and having as much on my credit cards as I did hurt my score, even though I pay them off each month. As I mentioned earlier, I have 12 credit cards. I have a gas card, a Master Card and a VISA in my wallet. The other 9 are locked in my safe deposit box but, I have a monthly charge for each of those 9 accounts because I have set up an automatic pay for my phone, cable, electric/gas, and the 6 monthly contributions I make in tithing. Each of the 12 credit cards has a nominal monthly charge, and I pay each and everyone off, on time, every month. I have all of them come due on the same day of the month because I utilize on-line bill pay to ensure I am on time with each account.
Say what you will about the need for a FICO score but I believe it is an absolute MUST in today’s world. Mortgage/loan interest rates depend on it, credit extended depends on it, even ascertaining a job depends on it. I have not doubt in my mind it is an essential to daily living now a days. I’m prepared….are you?
Ginny says
One more reason to have a credit card. My husband has a rare cancer, plus chronic kidney disease. For a while, the medication he needed for the CKD had to be purchased from a mail order pharmacy, and they required a credit card for it to be shipped. (Now we get the drug from the local pharmacy, but it’s still expensive.) Just last week, we started getting a new medication for his cancer and – no choice – he has to get it mail order. Same stipulation. The cost to us varies depending on where we are with the Medicare donut hole; right now since we’re through it, the medication is just under $500 per month. But come the beginning of the year, we’ll be socked probably $4300+ for the first month! In this case, no credit card, no medication, and time was of the essence. There just isn’t any other choice. So even if you don’t believe in credit cards, you might be forced into a situation where you have to have one. I realize our situation is unique, but it’s something to think about because none of us knows what changes may occur in our lives even tomorrow.
Elizabeth says
This is exactly what I mean when I say you need it for emergencies. Hope your husband is doing well, all the best to you both.
Laurie says
I read this full article on our local money section of our newspaper over the weekend. The simple reality of life is that plastic is here and not going anywhere. I would also not be surprised in the near future if we just had to wave the plastic card at some scanner and off we go. I have 1 CC and 2 other cards. One for our huge local furniture store that offers 0% interest and a higher end dept store where I get a lof of high end clothes and shoes for what I would pay at Target it is also 0%. Sure I have the cash to pay them off,but since there is no interest I can take my time. I follow a loose budget and have been through Dave’s FPU. While I make a good income as a nurse if I want to allocate spending money just for fun and go out and spend a $100 on whatever I want I do it. While a strict budget is not for me we are debt free excpet out mortgage. I am in no hurry to pay off my house at this point in my life. We live a simple life and are richly blessed for our modest home and also have chosen to live in a state that is affordable in order to live the life that we do. My children know that we save most of our money and they too save what they earn,but we do take expensive vacations every 2yrs and have a vacation acct that pays for this up front. I think as the article said that cash will not have a comeback and less and less bills are being made by the treasury for this reason. I have not walked into my credut union in over 2yrs as I do everything online.
Erin says
I have to say those prepaid VISA cards are terrible. One time I tried to use one to buy online and something got messed up on the merchant’s end (I think it was that I ordered something that was out of stock), yet they couldn’t reverse the hold on the charges. I had to wait TWO WEEKS for the money to get freed up again. That was the policy for the card I had. Such a pain. I do agree it’s best not to use credit cards in general but for buying online I think they are safest. If you use a regular credit card and you end up with a problem with your purchase, the card company often helps you out. Also, if the number DOES get stolen, the fraud protection on a credit card is usually much better than debits. We had our debit info stolen once (at a gas station) and we had to wait over a week to get the money back. Luckily it was only $70 but if it had been after payday it could have caused us to miss a mortgage payment while we were waiting for the money!
Jen says
I have to say my experience and a course I took on preparing your credit for buying a home has contradicted most of his article. 1. You don’t have to spend more. If you have a problem with that you can leave them at home. After taking the course the majority of what is put on my cards is automatic billing for my utilities. It has been great for the months they messed up my bills. By the time I had to pay it they had fixed it. 2. Card bonuses for paying your bills and buying thing you would have purchased with cash are very worth it. 3. Many bills are very difficult to pay in cash and that requires you to drive somewhere. With high gas prices this is a waste. Not to mention the nightmare you have if they credit the wrong account. Automatic billing to a card avoids this. 4. Identity theft is often on accounts opened in your name. Other than the bad credit you’ll have lowering the limit on these, using cash offers no protection and the chances of your money being stolen or lost is much higher with cash. Wait until you have teens in your house and you have top count all your cash all the time. 5. Don’t carry your card problem solved. 6. Many companies are charging fees for gift cards now and they get lost or can be messed up by cashiers. You also don’t have the same rights with a gift card online that you are given with a credit card. If you are over charged or your item doesn’t arrive you could have major problems. You shouldn’t use a debt card online for this reason either. 7. Credit cards don’t have to be a debt. You can pay them off every month with the same results and have good credit. 8. He just sounds paranoid here. If someone really wanted to track they wouldn’t need to use your credit cards as long as you use cash for daily spending. Your bills are all tracked somewhere anyway. 9. I don’t see how making a cashier give you change gives you a connection and loans for the other things have been around for a long time. 10. Using cash at merchants doesn’t have to mean no credit cards. I don’t usually use my cards that way and no one has to. In conclusion not carrying or using your cards only for emergencies and bills avoids all of these problems and keeps your credit score up so you don’t have to spend more on your mortgage. Oh and the person that said to getting a mortgage where they have to research your income and spending will still cause you to have a higher interest rate. Yes you can get a mortgage that way, but you will pay a lot more in the long run. If self control is your problem then leave your cards at home and only use them for household bills.
Nicole says
Credit cards saved us when my hubby had an accident a few years ago. We had just bought a house and virtually nothing left in savings. He was off work for 4 months. That said, now we have more debt than we’d like, mostly due to the fact that as soon as he got back to work, they cut his hours back.
Credit cards definitly have there place. If we didn’t have them, we wouldn’t have been able to pay our bills during that 4 months. And thankfully, we should most of our debt (except the mortgage and the car) paid off by the end of the year.
Elizabeth says
I think this is an excellent point. We use credit cards and pay them off each month. As a result, (and with 800+ FICO scores) we have tens of thousands of dollars of available credit. While (of course) I would never use that for “fun” stuff, I know it is there in the event of a true emergency (though the CC companies are pretty good about smelling blood in the water, and can decrease your limits if they are concerned about your ability to pay it off).
Not having access to credit (which today means not using credit) cuts off a huge safety net for your family. Now, there are some people who just can’t handle it, and then the certainty of financial ruin outweighs the risk of future disaster. But for most of us, I think we’re foolish to not leave ourselves this important safety net.
Crystal says
I personally wouldn’t recommend credit cards as a “safety net”. I’d much rather have good insurance (health, disability, etc.) and a good emergency fund + be debt-free and live beneath our means than rely on credit as a safety net.
Of course, I’m very weird in that I’ve never had a credit card, don’t have credit, don’t want a credit card, and don’t have any debt. 🙂
Elizabeth says
I hear you, Crystal. I do. You are essentially self-insured at this point, and it is a wonderful position to be in. It’s just that I teach Emergency Preparedness, and am a “Worst Case Scenario” person. If you’ve got 15 minutes to evacuate, you aren’t going to stop to get cash, transfer money from savings to checking, etc. Hotels put huge holds on debit cards, and there is a limit to how much cash you can pull out of an ATM in a day– and how much is in a person’s checking account. What if something truly dreadful– I’m talking Katrinia, Haiti, Japan dreadful– had happened when you guys were in Law School? And were months displaced, and your family and friends were in the same boat? You live in Joplin, and the local bank gets destroyed too? Sure, eventually they’ll get the record pieced back together, but what are you going to do in the mean time? What if (God forbid) one of your kids needed out-of-network medical care at a private facility? There are a million reasons why an individual’s safety net may not be enough… granted, they aren’t very likely reasons, but they are going to be devastating when they do occur. Like I said, I’m a worst-case-scenario kind of person. 🙂
Melodie says
It’s nice to be able to afford health insurance at all. Or to have an emergency fund left. Or to be debt free.
Not everyone can do that. Yes, we are currently debt free. Aside from that, we struggle. What are we supposed to do when insurance costs more per month than my husband and I make total? What about when DH and I had to fall back on our emergency fund because he lost his salaried job and had to go to a “by the hour” job that pays little more than a high school student would earn while I stay home to take care of the kids? What about when that situation carries over literally years so that we have no emergency fund left? What about if every extra penny we can squeeze out is dumped into trying to start our own business so we can get out of this paycheck to paycheck prison we are now in?
The perspective of a credit card safety net is quite sensible to me from this angle of reality. I agree that the ideal situation is to be financially self sufficient. But it isn’t always a possibility. Suggesting that it’s unwise to look at any other option can really build a guilt complex for those who are genuine victims of a failing economy. Should it be used only as a last resort? Absolutely!!!! But it is not completely unadvisable. Sometimes it really is the only option left.
Rudi Pittman says
I always enjoy the calls to the credit card company when I am calling to have my credit limit LOWERED….they regularly like to offer me automatic increases “based on your excellent payment history.” etc…..when going for a car loan or mortgage those institutions consider your available credit potentially available debt. I’ve seen some folks walking around with $75000 in available credit on multiple cards…since I always autopay my cards in full I don’t need more of a limit then what I think I will accumulate in a month and I don’t have to care about what the APR is then either. Every time I call to lower my limit or in the few cases where I’m cancelling a card because they messed with the rewards or I found a better reward card they always offer special APR’s….credit line increases…free balance transfers etc….
I use credit cards…have no debt..house, 2 vehicles paid for etc….it all boils down to how you choose to use it. I also like the breakdown the cards give me of how much I spent in each category….groceries…entertainment etc.
Elizabeth says
Why do you lower your credit limit? That hurts your credit score, because part of your credit score is the ratio of debt you have (including the less than 30 day debt) to the credit you have available. Part of the reason why my credit score is so good (beside the obvious that we’ve had credit for a long time and always pay our bills) is that we have huge limits and don’t use them. Is there a reason you keep your credit limit low? Just curious.
Rudi Pittman says
I lower my credit limit because I use about 4 different credit cards and don’t want them auto increasing the limits. I only decrease them when they auto increase them without asking me. As mentioned, if you want to get a loan or mortgage that available credit is considered available DEBT. A friend was forced to cancel several cards and would have had to wait till the cancellation showed on his credit report except he was using the same bank for the mortgage as the cards he cancelled. They would not approve his loan until his available “debt” was reduced. My score is typically in the mid to high 700’s It could be better but I haven’t been denied a card, mortgage etc when I needed one. Apparently I’m not hurting the score to badly because back when I had a mortgage they approved me for 3x the amount of the house I was building.
Elizabeth says
Makes sense! Thanks for pointing that out!
Susan says
It is sad how well the idea of the FICO score has been MARKETED to us by financial companies/institutions. Especially since the score is not an accurate indicator of how well, or not well, one manages their finances. It is just a made up number based on loose interpretation, and it really makes me mad how many people operate their finances based on what will happen to their credit score. Do some research on the FICO score and you will understand that it is basically a “purchased” product.
Nicola says
Not at all. I’m not a US citizen so have NO score at all. What do you think my chances are of getting anything? I couldn’t even get a cellphone contract because I have no score. They instead ran a check on my husbands score and gave him a second line for me.
Perhaps it is marketed but when you aren’t a citizen you NEED FICO.
Nicola says
I thought financial advisors were advising that yous hould always have a card open in your name purely to build credit. You are saying ‘I qualified for a credit card and am not using it/paying my monthly bill’.
I think that people have to take responsibility. If you have a credit card you have to use it wisely. I would never ever destroy our cards. We make a few small purchases a month purely to build good credit they are INCREDIBLY important for a Scottish citizen in the US with no credit score.
I would discourage my daughter from getting one until she was financially stable.
I am shocked that you were offered a cellphone without a credit score. Even as a returning customer my husband renewing his cellphone he had to have another credit score ran on him. It is rare that you DON’T get asked for it.
Elisha says
Even Dave Ramsey himself said that his advice about having no credit vs any credit is for already established homeowners.
It makes no sense in today’s society to not have any sort of credit when you are still building your life. Unless you were born with a silver spoon in your mouth.
My husband and I haven’t had credit cards for years because we watched it destroy our parents finances. What we didn’t stop to think about is the manner in which they used credit cards. If you don’t have it in the bank or your wallet, don’t spend it. If you’re going to have credit cards, make sure that whatever you purchase on those cards you already have the cash to pay for it. We have found it extremely difficult to even purchase cars, even though we can more than afford it, we ultimately pay more because we don’t have a lot on our credit reports. If you’re smart about budgeting and you aren’t an impulse buyer, it can easily be done. You just have to have the will power.
Brandi says
We are 100% Dave Ramsey. Debt free but our 15 year mortgage (which we plan to pay off sooner). However, this is one of the subjects that I don’t agree with Dave on. I have a small business. I use a card that allows me to track all my purchases and makes figuring out our taxes SO much easier. I don’t have to hang on to every receipt. I know I would lose some if that were the plan.
Just today I had to make a return from Target. I did not have my receipt. However, they were able to look it up on my Visa (debit card). If I had paid cash, they would not have taken my return without the receipt. Most stores require a receipt or the card used to purchase. For me a safety net for those things. I’ve also used the coverage my card provides on major purchases beyond what the store provides. It’s usually 90 days not 30.
Last, we keep an airline card. We fly A LOT and there are 4 of us. Bags are now $25+ per bag EACH WAY. Our card gives us 1 free bag per ticket purchased with the card. We fly at least 6 times a year. That saves us $1200 in baggage fees alone. Well worth it for us!
Nicola says
If you don’t mind me asking What airline card do you use Brandi? we fly to my parents home in Scotland twice a year for me, my husband & my daughter it costs almost $6000 a year. I have tried looking at airline cards to get a bonus back instead of using cash money. I feel like they should be paying us to fly! I have tried looking into airline cards but they all seem quite confusing.
Brandi says
We use Continental. We find that even if the ticket is slightly more expensive, the free bags usually more than offset it. I’m not sure what their international routs are.
Rudi Pittman says
I think the Delta Skymiles card also gives you 1 free bag when flying through them.
Melodie says
Call me weird, but I spend cash lots faster than I spend credit card $$. If I have cash in my wallet, I feel like it’s my mad money. Credit cards? That’s my version of a debit card . . . except it pays me back better than debit. I feel every penny that squeezes out of my grasp via credit card because DH and I keep each other accountable and discuss every credit card receipt. We keep a very tight reign on our spending. We do NOT agree with destroying your credit cards. We believe in changing our perspectives so as to use them wisely as long as they serve us and not the other way around.
Beth L. says
I’m totally the same way. Each time I use my debit card I get a mental image of that money coming out of my account. When I use cash, it’s almost like free money. That whole psychological thing that is supposed to happen when you spend cash vs. credit or debit is completely flipped for me.
Amy says
Me, too!!! I think it is because with the credit card, I have a permanent record of what I bought and where and how much. It hurts to look at the credit card statement and see that I spent $5 on a coffee at Starbucks. With cash, it is like it never happened!
Melodie says
Exactly. It’s that healthy fear of accountability. The absoluteness of that Day of Reckoning — you know, the day DH checks the credit card statement and makes his comments about which purchases were unapproved (each comment followed by about ten exclamation points and a little moaning about the new shoes he or the kids needed and will have to wait longer for because the money isn’t there now . . . yeah) — is enough to whip me into the submission of the budgeted credit card.
Cash on the other hand? Well, as long as I pinch something else just right, I don’t have to explain that cup of coffee.
Rebecca says
Has anyone tried a few months of cash only system without using debit or credit cards? We pay off our one credit card monthly, but I’m starting to wonder if moving to a cash only system would save more money throughout the year than the 500 bucks we receive at the end of the year from using our card…I guess I keep thinking, “well, I’m making money on the money I’m spending” with the cash back rewards…but what if I’m just spending more money period by using the plastic? Is the whole 2% or 1% cash back just a gimmick to get us to spend more thinking we will earn more?
Crystal says
Definitely, definitely try this! It’s what one whole chapter of my new book is about!
Rebecca says
Looking forward to reading the book! I love your website! Lots of good practical advice:) We are on Baby Step 6 of Dave Ramsey’s plan and we feel somewhat lost on this step…like what are we supposed to be doing with our money…pay off the house or work on other financial goals since we spent 2 1/2 years getting out of debt. I think the cash only system (without any plastic) is about to be enforced. Thanks for the encouragement!
Crystal says
Way to go on getting out of debt!
Rudi Pittman says
My bank won’t even pay me 1% to keep the money with them…I’m at least going to get the 1% if not more through my reward card and the 30 day float which lets me keep my money a little longer.
If you were concerned you would impulse buy more you could get a simple reward card that pays 1% back the next month and just set up all your bills to autopay from the card…rent, gas, electric, water, cell phone, home phone, internet..etc….autopay them all from the reward card then setup autopay for the card from your bank and finally put the card in a drawer…now you are saving 1% on all the bills you know you’d have to pay anyway and the card is not readily available when you see some gizmo at the store…heck I’ve read that some people freeze them in a block of ice so they have time to think about a purchase they want to make. Having all your bills autopaid also helps your credit history and saves you the rising cost of postage.
Holly says
I am currenly paying off debt. I hope to buy a house in the very near future, like within 6 months, but I am scared to death about my credit score and how it will affect my husband and myself on our home purchase. I fell into the credit trap and i will not be fooled again…. Paying with cash is so much better.
Sheila says
Try a website called http://www.creditsesame.com. You can see what your credit score is and how it changes over time. I started using it a few months ago and find it to be very helpful.
Kristi says
Interesting article! I do believe that it is all individual for each family. I agree completely that it is easier to spend money easily with a credit card (I used to be there). I also believe they can be used wisely when you understand and stick to your budget. We do use credit cards and pay them off, but stick to our budget very strictly that we keep track of as an app on our phones. And I am just not willing to give up our great credit scores. They do take them into an account on an amazing amount of things. But I think it is all a matter of the control that you have and your willingness to really stick to a budget. To each his own, I think you need to take the good parts of everything (Dave Ramsey, etc.) and come up with what works for you and your family.
Peggy says
When my husband lost his job 2 1/2 years ago we had to get the mind set that if we didn’t have the money for it we didn’t need it. We have lived that way for 2 1/2 years now and it really is a better way to live if you ask me… No credit cards in this house…
Kim says
We have a credit card, but we pay cash for just about everything. We pay the credit card off at the end of every month.
Although this might not be as convenient and could end up costing you money, if you aren’t careful, here is another idea for on-line purchases. We have purchased store specific gift cards from our Kroger store for close to the amount we are going to spend at say Amazon or Kohls. We purchase the card with cash, get fuel points for buying the card and then use it to complete our on-line purchase.
Just something to think about.
Becky says
My car got broken into yesterday (i was somewhere where i felt safer leaving my stuff locked in my car in daylight in a nice neighborhood rather than leave it unattended in a crowded venue) and they took the cards and cash out of my wallet (which they left). I hadn’t worked on the budget yet this month nor pulled cash so they only cash I had was $20. I am so glad they did not get the $90 the week prior, or the more I would have if i were still trying to follow a cash-only system. All i had to do was call mybanks and I was set.
Boniva says
I’m with the birdhouse analogy, credit cards are a tool. There are no absolute merits to either having or not having. A knife is useful for cutting meat, but if you’re so clumsy as to cut yourself each time you use it, then it’s a danger, and perhaps you should purchase food already cut. So basically, if you don’t have a spending problem or ever been in credit card debt, stay away from credit cards, you’ll only end up being in debt again because you’re clumsy.
As to mom and pops taking a hit from credit card use, well, you can always do “cash only” or “minimum $15 for credit card use”. No one is forcing these small store owners to allow credit card use, if they can’t afford it, then perhaps they shouldn’t offer it. I always have cash with me, although I’d prefer to use credit card. Cash are pretty disgusting for one: the smell alone. And coins are downright awful things to have in your pockets.
Beth L. says
While I feel for the small business owners who are stuck with the fees, it’s important to remember how much business they get because they accept CCs at all. If a small business owner refused to accept debit/credit cards, they’d likely be out more in lost business than they have to pay out in fees.
grace says
I have had a credit card since I was 16(now im 24) and there has only been 1 month that my credit cards have not been paid in full (we use 4 actively) I actually do think of purchases in terms of hrs of work. Yes she made some valid points Im definately going to chew over, but if you are super disciplined and dont really overspend then yes rewards are there since I have had one of my cc since I was 18 they give me fantastic deals I would not otherwise have had. Where I live there are so many dishonest merchants and people with overcharging, selling merchandise not as described, etc. fraud protection is really nice. I have no intention to give up my credit cards. Sometimes I probably do overspend especially when it comes to kids clothes 50% additional off clearance prices. However most times I go into the store armed with coupons and only put less than 10.00 on my credit card because at the end of the day, I still have to shell out cash for the bill. 🙂
Jessica says
As much as the idea of “no credit cards” appeals to me, we are actually going to get one just to try and boost our credit score.
You see, we just moved to the USA after living overseas for 7 years (my husband is from Australia) so we had no US credit score. We had good credit in Australia, but that meant little or nothing to the mortgage providers here. Even with underwriting and many months waiting, it was close to a miracle that we were able to buy a house. And at a much higher interest rate than the going rate. 🙁
We are hoping to refinance in a few months at a lower rate after attempting to build our credit up. It’s a shame that paying for things with cash rather than using credit all the time is punished here in the USA!
Katie says
That’s meant to be “saved” a huge, huge amount – just in case anyone thought spent!! Ha Ha
Katie says
I’m just learning how to be frugal. We paid off our credit card and we will never have another one. We paid off our car loan and will never have another one. I didn’t listen to the cash only advice and carried on using my debit card but this month I used cash only and a huge, huge amount! (My husband was very impressed).
In my experience, the only way for me is cash only – I feel so much more in control. If my children ask for anything I can show them how much money I have and they can work out if we can afford it. I’ve noticed that even little purchases can make a huge difference to the overall shopping bill – you know those impulse purchases at the checkout.
My biggest regret is I have only just learnt to be frugal – I feel ashamed at not doing this earlier in my life. Mind you, I think as a child I was quite spoilt especially with money so that’s probably why I’m not so good with it. My dad still buys my clothes and I’m married with two children. I have completely changed my spending habits and attitude to money. For me – credit cards are just not worth it but I can see that some people can use them sensibly.
Brittaney Storms says
This was an interesting article but I can see that it is not intended for someone under the age of 25. This article is assuming that you have had a preestabilished credit history for a while if they are saying it is okay to cancel your cards. I have had a credit card for 3 years now. That is my entire credit history. If I cancelled it I would loose everything. I am 21 and I now have 2 cards. One with no balance and I keep because it is my credit history, the other I got to use as my primary card to replace the old one since it has a better rewards program. I need these cards so I can buid my credit history and one day be able to apply for a morgage. Yesd I know paying cash is better and that is my goal, but I know people in there late 20’s that have never had a credit card and therfore no credit history. The lack of credit history won’t allow them to get a car loan or even the smallest of loans.
Beth says
I think this is a great article, perhaps with the exception of using the pre-paid card. 🙂 That seems silly to me. Wouldn’t it be easier to just have a debit card for online purchases?
Our family has been credit card free for almost 4 years and we are LOVING it. Haven’t felt the need for one once. We’re on baby step 7 (paying off our mortgage) and, God-willing, will have our $350000 house paid off in full in 6 years. We spent a hard two years paying off debt. It was SO worth it. I don’t look down on folks that do use credit cards, for whatever reason…. but I do know that my husband and I feel so financially free. It’s amazing. I think even if you have a credit card that you pay off every single month and never carry a balance… I think that puts you in bondage. I think it causes stress, whether folks realize it or not. It’s such a great feeling to know that we’re well on our way to owing no man, and that we’ll be financially free to follow God wherever He leads us.
Alaine says
Congrats on your success! I can see where the cash-only route would work for you, but for those of us without a mortgage (yet), we still need to keep our credit history active! But if I already had a mortgage, I could completely understand going credit card free.
Christy says
We charge large purchases that we already have saved for with our AmEx to get the rewards. Plus if you charge an item to AmEx, they gaurentee your money back for a year longer than the product warranty if the product fails–great for things like laptops. We just pay it off using on-line banking literally minutes after making the purchase.
Heather @ REOlisticRenovation says
We just started the Dave Ramsey plan and are working on paying off two cards now and then we will just keep them without balances or use them for travel and gas and pay them off each month.
Meredith says
It’s all cash in this house… plus, we pay with paper and save the change. (with the exception of gas, which we use our debit for. I’m not dragging my kids out of the car every time). We just cashed in our change ‘cup’ and had $307… easy savings.
For everyone who uses CCs for everything, I would just challenge you to go all cash for 3 months and see if you’d really don’t end up saving money. My sister was very responsible with paying off her cards at the end of each month. I challenged her to try cash only and she found she used her card more easily for things she really didn’t need. Now that extra money is going into her savings account!
Jessica says
Why this is kind of off topic it fits because people are talking about credit scores and such.
I am moving at the end of the month so yesterday I called to set up my new electric account. I was SHOCKED! when they wanted a $100 deposit before they would turn on service. While I don’t think my credit score is perfect (lost track of a few cell phone bills along the way a few years ago and had issues with insurance bills being delivered so they were late also) it is good. (I have never made a credit payment late or utility payment. )Thankfully, after a call I was able to have my current electric company send the new one a letter stating that I was in good standing and had never paid a bill late. The new company waived the deposit based on this letter. When I called about the deposit the company said it was required because we hadn’t built a relationship up where I could prove that I would pay them.
Situations such as this are examples of how sometimes it doesn’t matter if you have a good credit score or not. It baffles me that a utility company could require it when they are the only provider in the area.
Brittaney Storms says
I had the same thing happen with my electric company. NO standing so we had to pay an extra $100, but we will get it back after a year. Only 2 more months to go.
Katie says
I disagree with those who state that credit card users spend more because they use credit cards. I put all my monthly bills that I can on my credit cards then pay it off each month. I also am on a strict budget. I put it on my credit card, but I know I have money in the bank to pay it at the end of the month. I just cashed in $850 worth of points between my husband’s and my credit cards. We’re going to use that money to renovate our house. Responsibility is a must with a credit card, but it can be done. I would never go all cash because I would lose the change. It’s so easy for change to fall out of my hands or purse. Cash is also too easy to lose. *My nieces found $100 bill at Walmart last December. My sil called Walmart, but they said someone likely wouldn’t try to claim it.
Christie says
I understand that people don’t want to use credit cards because they track your spending etc. What I don’t understand is why someone would use FaceBook for a coupon. You are still giving away information about yourself. I only use coupons that are “anonymous”. Ones out of magazines etc.
Rebecca says
I have a second FB account strictly for couponing. It does not have my real name or info. The e-mail address is a separate gmail address that I set up for couponing.
erika m says
I totally agree with this…thats why facebook weirds me out…too much personal info, especially if you have to friend/like somebody to receive it. And, if facebook discovers you have a false name, it will automatically close it….fyi
Rebecca says
I did not realize that FB would close an account with a psuedonym (sp?). If they do, it’s no big deal. I have no “friends” on it since it’s strictly for couponing. I use it to “like” all the businesses that offer coupons (then I “unlike” most of them after printing my coupon). But I don’t want any of them to have access to my name or info, or any of my family/friends names & info. But thanks for letting me know! If it disappears, I’ll know why!
Jen says
I have multiple credit cards that I use on a rotating basis depending on the rewards program they are offering at the time. I pay everything off every month and never incur any finance charges. I do, however, earn hundreds of dollars in rewards (just got $100 in Bed Bath and Beyond gift cards for using one of my cards). It’s all about responsibility and not spending money you don’t have. Credit card debt is awful (I’ve had it in the past) and I will NEVER go back to owing money to those banks. Now they pay me to use their cards! 🙂
Easy2Save says
We use our one credit card more like a debit card and pay it off about every two weeks. We also get perks from the card 🙂 Good article Great blog.
Arissara says
I disagree most of this, I only use Credit Card and not use Debit card at all
1. I was come from another country- I need to get credit score so I can get loan, I need to use credit card for credite score, what happend is, if some day for any reason if I loss my HD(just in case) I could not live here with the kids, I’m sure I will need money(just in case) at that time.
2. I got free Airline , I already claim 2 ticket,it would cost $1500.00 for 1 ticket to go back home but I got them Free and another 2 ticket is comming. I planning to go home next year.
3. I never be afraid if some one use my CC online, It happend 2 times that was some one using my CC but the CC company called me to verify the purchase becuase it is not My IP computer address so they cancell my CC and send me new one they also disput the charge, I did not to do any thing. I really happy it that.
4. We always paid off our CC in Full amount.
5. I know my limit to spend money every month and I always check detail every month.
I use to work at the bank so I know how is Debit card work, I will never use them for my life.
Selena Carlo says
I am not a Dave Ramsey fan, as most of his advice is extremely no-brainer type stuff, and he makes millions off of it. It seems a little excessive. I know his “advice” is to never use credit, and I AGREE! …but that isn’t realistic in most of America. Things cost way more than they’re worth! Even used car prices are soaring.
This is a country where teachers get paid dirt while people playing a ball game get paid millions. This is a country where a college education costs at least $30,000 for four years. This is a country where every single thing you would THINK is common sense has to be “sold” and “marketed” to the public. We have to be convinced to be responsible and held to laws to not do bad things to others.
Money is a tool to get what you need. It’s not a bargaining chip, something to abuse, squander, or obsessively focus on.
Have a credit card or a debit card, or simply use cash. It is no one else’s business because your life is no one else’s to live. What works for a family of three blue-collar workers might not be ideal for a family of eight upper-crust aristocrats. And yet, we all need some kind of money.
Stay within your means regardless of what you pay with.
And remember: priorities.
Megan says
Another data point: My husband and I are both in graduate school and we live on a strict budget (it’s very close to what Crystal and Jesse lived on during their poor law school days). We put nearly all of our purchases on our two credit cards and have had no problem sticking to our budget (we pay the cards off in full, every month). For us, as others have posted, buying with credit hurts, but cash feels like “free money” and spending it is easy. It’s really all about knowing your own habits and what helps you save the most so that you can give more and honor God with your money.
Krysten says
My husband and I use our credit card for everything! Well, except for garage sales. ;^) We just follow a strict budget and pay it off every month. Plus, we earn about $150 a year in cash back rewards – that’s 1 month of free groceries every year! Now that’s savings!
Danielle G. says
I’m a huge fan of Dave Ramsey. Credit scores don’t matter when you have the money saved for the things you need. That being said, after our debt gets paid off in a few years, I’ll probably hang on to 1 card as a backup to our emergency fund. It’s tough to let go 🙂
Aryn says
Actually, this isn’t true. Insurance companies now often review credit scores before quoting rates. Mobile phone companies may use the score to decide whether to issue you an account. Utilities may require a deposit if you have no score or a low score. Some employers look at scores before hiring.
Crystal says
I was not able to set up my cell phone without putting down a hefty deposit because I don’t have credit. I’ve never had credit cards ever and have rarely encountered an issue, but it does happen occasionally.
Heather says
Yes, a friend of a friend was denied a job recently because of her credit score. Great candidate in every other way, but the company turned her down. It wasn’t a financial institution either.
My husband also worked somewhere once where a man was about to be hired, but then did not get the job due to his credit.
Susan says
That’s crazy. It is absolutely ridiculous that companies put a candidate’s credit score above all of their other qualifications.
Elizabeth says
Crazy, but it happens A LOT.
Rudi Pittman says
Let me start of by saying I personally do not agree with any of this but I think the belief is something like this: If the person has a low score or a history of missing paying on time then they may also have problems making deadlines etc….additionally insuring the employee may be more expensive and people with large amounts of debt may have a higher risk for theft, criminal activity etc…
There may be alot more to it but thats the only things I could think of regarding why credit score or history might be reviewed.
Jessica says
Yes, utility companies are a huge pain to deal with when you have no credit score! I know this from our recent move to the USA….
Sara says
Home prices average $500,000 where I live. We will NEVER save $500,000 cash to pay for a home. Even if somebody did manage to save that much money, I wouldn’t want to throw it all in a house and have zero in savings. We pay extra to our mortgage every single month, but I disagree that credit scores don’t matter. Dave Ramsey has some good points, but he’s SO all-or-nothing, and I don’t agree with that.
Heather @ Creative Family Moments says
I believe as long as you are disciplined and use credit cards like cash (we write it down in our ledgers with keys, such as ‘D’ for Discover) that it can be a huge benefit over cash. I agree with the others on the benefits of the rewards.
Holly says
We do not use credit cards, and do not plan on doing so in the future. The added perks from using credit cards are not worth it to our family. I say the decision to use credit cards is an individual one as some people are more responsible than others with them. Others, like ourselves, prefer to use our debit cards to pay bills, and cash for other transactions. There is no right or wrong answer here.
Brooke says
I’m just not a fan of the idea that there’s only one way for everyone. We had to find a balance. I didn’t have a credit card or car payment until well into my 20’s but then when I tried to apply for anything that needed a credit score I was rejected. It was like I didn’t exist in the world and had no credit making a lot of things hard (I was even had to have my parents cosign on an apartment rental which I hated to do). It was important to me to establish credit. When my dh and I got married and bought our first house we got a higher interest rate because we had “not enough revolving credit”. That was a blow.
So now we compromise. We have one credit card which we used for fixed auto pay expenses only (cell phones, gas, electric, cable, etc.). Anything variable like groceries and entertainment is cash only. We pay our cards off every month, have no credit card fees, get about $300 worth of reward cash every year and never overspend because I don’t ever take my card out in a store.
Alaine says
that’s a great idea (using the card for fixed expenses). Sounds like you have found a great compromise!
Jessica says
A couple of points of interest:
1. I earned over $1000 in cash rewards last year through my card which I pay off completely monthly. There’s no annual fees, and it’s a standard Bank of America credit card.
2. Many people paint credit cards as too much of a personal liability (tempting them to overspend), then prize themselves on their self-control via cash. I understand that temptations differ individual to individual, but, I view credit cards as an exercise in self-control, and not something to be feared.
Jenni says
We use credit cards because it is easier to keep track of our spending with them v. cash. Some people talk about the pain of having to hand over cash when you pay – for me, it’s painful to see a high balance at the end of the month on our credit cards – it shows how much it adds up, so we like to keep it low. We rarely rarely buy anything on impulse – not even eating out. Instead, our cards are used for major purchases which, given that we had to do them anyway (like pay for a cross-country move) might as well be put on a credit card if we have the cash in our account to pay it off in full. The key to me is that I always always pay it off in full. I also check a couple of times a week online to remind myself of how much we are spending.
Jessica says
I find that I agree with a lot of the comments on here. I truly believe that everyone has to find what works best for their family and go with that, not what a blogger, or even *gasp* Dave Ramsey, has to say. 🙂 That being said, I find blogs, articles, and people like Dave Ramsey extremely helpful in getting the information out there so that your family can make an informed decision for yourself.
I would even venture to say to everyone stating that they “love Dave Ramsey, but…” he has to be forceful in his way of doing things because most of the people coming to him in desperate need of help aren’t like all of us commenting on here. They *can’t* control their spending and can’t handle having credit cards so he gives them the tough love get rid of them lecture. As some of the comments on here said, that’s the only way they could get out of debt.
queuepawn says
We have cut back drastically the use of our Visa card and NOT surprisingly, we’re spending less and saving more. We paid off our 5 year car loan in about 1 1/2 years and we are set to have a 6 month emergency fund plus $5,000 ($1,000/person) for medical emergencies by October of this year. The only debt we have is the mortgage on our house–5 years into it, but planning on paying extra so that we can be done in less than 15 years (10 years from now). Back to how we use credit cards now. . . there are certain things we save for, such as a new laptop, Christmas gifts, etc. We transfer that money EVERY MONTH into our Money Market account at our Credit Union and I keep track of it in an excel spreadsheet. At any given time, the amount in excel, matches what the bank says we have in that account. When we go to buy the laptop or Christmas gifts (or anything else we’ve been saving for), we put it on the Credit Card, but the money is in our account–we do have the discipline to check the amount and not overspend by “borrowing” from another category. Since the Visa card is with our Credit Union, we pay it every month by transferring money from our Money Market Account to the Visa Card. Yes, it’s a credit card, but we use it only for things that we have the money for in our account. It won’t work for everybody and I know it sounds complicated, but this works for us now. Before we started this method, we would use it for things we “needed” and would spend more than we should have. We have other credit cards, but don’t use them and plan on cancelling them (one at a time) over the next several years.
Chelsea says
While I agree with many points this article makes, i completely disagree with the point on rewards and bonuses. We use a discover for gas, and get 3 percent back. I know it may not seem like much, but we are blessed by it, and for seven years have always paid the discover in full every month. When you put gas in two cars for 7+ years and get a little cash back every time… it adds up!
Bill says
10 Reasons You Should Never Use a Table Saw to Make a Homemade Birdhouse
1. If you use the table saw incorrectly you could cut your fingers off.
2. Using a table saw allows you to make the birdhouse for less than it would cost in the store. This is actually a negative for table saws because you could cut your fingers off if you use it incorrectly while making your cheaper birdhouse.
3. If you buy a birdhouse in the store you can pick out the exact size and shape object you want, plus you can’t cut off your fingers if you never use a table saw. (I’ll ignore the fact that you can also make a birdhouse the exact size and shape you want at home)
4. If you own a table saw it could break, if you don’t own a table saw it can’t possibly break. (I won’t mention the fact that your table saw has a permanent warranty that will provide a free replacement if it ever does break)
5. If you use a table saw improperly you could cut your fingers off.
6. If you don’t have a table saw you can still go out and rent a table saw to make birdhouses. This is actually a negative for table saws. The ability to pay for temporary use of a dangerous tool is somehow better than free ownership of that tool.
7. If you intentionally put your hand against the table saw blade while it is moving you will hurt yourself badly.
8. Using a table saw creates a lot of sawdust which some people don’t like.
9. The only store that sells birdhouses is 2 hours from your house. If you drive 4 hours round trip to the store to purchase a birdhouse you will appreciate it more than if you spent 4 hours working at your tablesaw. It is much easier to quantify value using hours spent driving in a car than hours spent using your table saw.
10. If you buy a birdhouse you are supporting birdhouse makers. If you use a table saw you are supporting lumber yards.
I think the author of the article makes the common mistake of leaping from “Credit cards are often used improperly” to “Credit cards are bad”. I think he would better serve his audience by pointing out reasons why credit cards can be bad, why they can be good, and how to tell the difference.
Blythe says
Thank you! I agree completely.
Krysten says
Thanks, Bill! You made me smile!
Kristine says
Good point, Bill. I agree.
Susan says
I have never thought too much about the privacy thing. I understand the point, but wonder who out there is really concerned with how much we spend on gas and at the grocery store. I guess if I was going to do something illegal though I will keep this in mind (jk).
I have records to reflect that in the last 8 years we have made over $5k in credit card bonuses. We use credit cards for just about everything we purchase and don’t pay any annual fees or interest. We are really disciplined with spending and don’t splurge. I shop around for different credit card bonuses to make sure we get the most. I worried that this might hurt our credit, but opening more cards seems to increase our credit score. Our scores are >800.
I think for those who are less disciplined with spending credit cards can be real dangerous. Otherwise it can be a helpful tool to help track your spending and not have the dangers of carrying cash.
Ashli says
I completely disagree with canceling all your credit cards. Not only will it decrease your credit score, but as long as you aren’t charging more than you can pay off each month you aren’t going into debt by using one. If a budget of $500 a month for food, groceries, and other necessities goes on a credit card and is paid in full at the end of the month and you get $10 of that back in rewards, after a year you have saved up $120 in rewards. Does your bank hand you a check for $120 if you use your cash? If you use a debit card exclusively and have your checking and savings accounts linked for overdraft protection and your debit card # gets stolen, your entire checking AND savings accounts can be wiped out in under an hour. Yes, you may be able to get most of it back, but you might have to go through a lengthy process to do so, and in the meantime you might find yourself short on funds. It’s not credit cards that are the problem, it is the lack of responsibility in the people who use them.
trisha says
I enjoyed the article. I’d also say for the VAST majority, you will spend more using a credit card, thus the “rewards” really aren’t all that great if you would seriously put a pen/pencil to it. We don’t have a debit card (we’re way too leery of them). I’m not fond of prepaid cards either. The cc does come in so handy for online purchases or renting hotels and such. Also nice when filling up w/gas and I have kids buckled in the car. Those things are accounted for in the budget/checkbook. I prefer cash/check when it comes to other purchases, otherwise I feel oh so broke the next month!
Bill says
I’m curious about your use of checks but non-use of debit cards. How is writing a check and deducting the amount from your balance in a checkbook any different than swiping a debit card and doing the exact same thing? It’s all just accounting, the only difference is the object you hand across the counter at the store.
While I don’t agree with budgeting using a cash only payment system I can understand why people use it. You are physically prevented from ever spending more money than your cash in hand. A credit card allows you to spend more money than you actually have, I don’t have an issue with doing that but I can also understand why some people do. If they choose to not use credit cards to prevent that possibility I get it. With checks and debit cards however I don’t see what the difference would be other than unfamiliarity.
Anna says
I think that American’s have been socialized to just “whip out the plastic” and never follow through on the consequences. My husband is Dutch and when he first moved to the U.S. he was appalled at the flippant use of plastic. This really helped me to look at my behavior. Since we travel internationally frequently a credit and debit card are necessities for us. When we go abroad we use our debit card to take out cash from an atm, which is FAR cheaper than a money changer in the airport. When we reserve a rental car on our credit card the insurance is covered by our credit card provider so we don’t have that extra expense.
I think that the “buy now pay later” mentality we embrace so easily in the U.S. (thank you marketing companies) needs to be scrutinized.
Just my thoughts on the subject.
Syndy says
We cancelled our credit cards 5 years ago and it has been the BIGGEST BLESSING!! We do have a debit card with the “Visa” symbol that we use to reserve airline tickets, hotels, and such. Never had a problem with them putting our money on hold. They do when we rent a car (which we’ve only done once since then) and at that time my hubs parents were able to use their card for us. Other than that one time it’s never been a problem, and we are sooooo much happier without the stress that credit cards made for us. I say it’s all about your personal circumstances and how disciplined you are personally!
Nell says
We do use one credit card and for 11 years, we’ve paid it in full every month. However, having said that little bit, I just want to say how much I enjoyed reading this article AND all the comments ;0), how much it all made me think and how much I appreciated it. Thank you ladies! 🙂
Whitney says
I am another one who believes that you absolutely can manage credit cards carefully, pay them off every month & never pay interest & get the benefits of the rewards. That is what I do and have done for many years & I get hundreds of dollars in rewards each year. It works for us , not to say that everyone else should do that. There are certainly many people who would do better to stay completely away from credit cards, and if you aren’t very careful then yes, they can be a very bad idea, but making them work for you CAN be done.
Rudi Pittman says
I agree with other reward card posters….if you handle your credit cards correctly they are money makers..by that I mean setup an autopay to pay FULL BALANCE at end of month then use it as a debit card…earn rewards on purchases you would have made anyway. Why not just use a debit card? A debit card does NOT protect you as much as a credit card…in the event fraudulent charges are applied to your account the money is already taken out of your checking and will remain missing until the dispute is resolved which can be 60+ days. With the credit card it’s THEIR money thats “in limbo” as opposed to yours…also some banks still have different rules for debit cards making you responsible for the first $50 as opposed to credit cards.
My mother was one of those people who always paid cash…when my father passed she suddenly found herself on her own with NO credit history….it made doing many things such as getting a mortgage very difficult and she had to work to build up her history much later in life then most.
If you can treat it like a debit card, pay in full and not “impulse shop” with it there is nothing wrong with having the credit card company pay you hundreds of dollars a year for using them.
I make 5% back on my cell phone bill from American express…credit is applied to next months statement..no waiting… 3% on restaurants… 1% everywhere…. 5% on rotating categories from Discover and Chase Freedom.
Recently I was able to buy $40 shell gas cards from Discover using $20 in points.
Heather says
I agree with this comment — we do the same thing.
In addition (ah, here come the dissenters now…), I actually have found that we save a good amount of cash each year by using a card that has an annual fee, which I vowed for years never to do. The reason why is that every year when you pay the fee, you get a free companion air fare anywhere in the US. We live far away from my parents, and always budget to fly home at least 2 – 3 times per year, and the cost of the annual fee is at least half of the cheapest flight option we would buy. In fact, in the last few years, it’s been less than a quarter of the flight cost! Net, due to my stubbornness at wanting to hold fast to “good financial sense” in not chosing a card with an annual fee, I cost our family at least $1000 in plane fares (versus the $450 I was “saving” by following “the rules”).
Net, I really think you need to examine your own personal tendencies (are you more frugal with a card or with cash in your wallet?), your spending habits (can you put some of your recurring expenses on a said card?), and your financial savings priorities (saving for college, travel / connecting with family, gas for commutes to work, etc), as well as the potential costs and rewards of any given system and decide what is right for you.
I know that the credit card helps us be more frugal and that we have several savings goals for which we can use the rewards or points from the credit cards, so we cycle as much as we can through them. The exact card we chose, however, is based upon the rewards they are offering now and how they match up with our financial goals, and these may change. Because we are the more flexible travelers now, we are the ones doing all the traveling, and that’s why we chose to use a travel rewards credit card. When my parents retire, we may chose to cycle our spending through a card that isn’t geared toward travel perks.
The key is to be mindful of your situation and to re-evaluate often.
Maine Mummy says
We got our credit card because the airline stopped letting us use the debit card for airfare. After not using one for years we now have a $6000 balance that we carry on them. It’s far too easy to use credit!
Robin says
Just a quick note to add…Debit cards can be very dangerous. Most debit cards give you the option to select the “credit” option.If someone gets their hands on it, and chooses that option, they can bypass the PIN, and still empty your bank-account, AND charge up to whatever limit before the bank freezes expenditures. You have NO recourse, if that happens before you cancel your debit card. Once it’s been swiped and accepted, that money is gone. With a credit card, you at least have the chance to cancel, and dispute all charges that aren’t yours. And, even worse, too many people keep their pin in their wallet (especially if you have multiple debit/pin number required cards)… If you can control your credit-cards, they are MUCH safer to use!
Another option, if credit cards are too much of a temptation to overspend, is to give yourself a pre-paid credit card, like giving yourself an allowance. Just figure in how much you need for a given period of time (say, one month) and purchase it for that amount. They are easy to purchase, almost everywhere, and work just like a real credit card when making purchases…but it’s different in that you pay ahead, and in that way it’s more like a gift card; when it’s empty, it’s empty. (some are refillable, so you don’t have to throw away that plastic every month) Granted, there are generally no rewards programs on this type of thing, but it can be very handy, especially for traveling (or for college students), or even online purchases.
Colleen says
I know a lot of people have a hard time not spending money when they have a credit card, however I am the opposite. When I have cash I burn through it and then have no idea what I spent it on. With a Credit Card I can see what I am spending. I know that means so can the Credit Card company but guess what almost any company you sales shop on keeps your information and tracks you to. Why do you think grocery stores have those loyalty cards, or Rite Aid, CVS and the list goes on and on. They are keeping information about you too. We do live in a world where we all have a trail of information we are leaving for people to sell and use, but really unless you unplug, don’t use any plastic (including loyalty cards) and move the country there is no way to avoid it. So be careful but don’t be unrealistic!
Jeannine says
Personally I feel an urge to move away from DEBIT CARDS as well. Because it is very, very difficult to keep track of purchases. In years past I think we actually spent more than we should of since we really did not keep good records.
I plan to use my checkbook and cash for future purchases.
Naomi says
Hmm gotta comment one more time here. Lots of people are saying that you need a credit card for your credit score. This just isn’t true. I had 1 credit card in college for a very short period of time. The rest of the time, I lived in apartments and paid all my own bills. When my husband and I were married, I was fresh out of college and we were looking to purchase our first home. I was afraid that I’d have a terrible credit score, but it was actually really great, and much higher than most young people my age at the time. My entire credit score came from all those bills I paid faithfully throughout college: rent, cell phone, electricity, water, etc. This made me realize that you don’t need a credit card to have a good credit score.
Besides, if you’re getting out of debt and not borrowing anyway, what does it matter?
Rae says
I also had a good credit score when we went to get our house but the thing that hurts you is credit history. I had only one card with a really low limit that I had only used like once and that was the extent of my credit history which was not enough. We ended up having to put the mortgage all in his name (or have a much higher interest rate). So while a credit card is not the only way to build credit, it is not just the score that they look at when you apply for mortgages/loans 🙂
Naomi says
Hmm, that’s odd because we were able to put the house in my name too. And I literally only had the one credit card for a short amount of time….maybe a month or 2 and then I decided to close it…didn’t want to tempt myself knowing I might not be able to pay it off if I got in trouble. We also got a very low interest rate on our home. It could have something to do w/ location though…I don’t know.
Rae says
Oh no I was just talking about me. You had the cell phone bills, utility bills, etc. We hadn’t paid utility bills before because we had always been in base housing before that and things like cellphones we always have in my husband’s name because of his discount. My only point there was that they look at not only score (mine was 700s at the time) but history as well 🙂
Bri says
I look at credit and decision loan applications for a living. With the exception of very few electricity companies in the mid-west, none of the things you mentioned above show up anywhere on your credit report unless you do NOT pay them and they become collection accounts. Paying your rent, cell phone, electricity and water will do nothing positive for your credit score (although will negatively impact your score if you don’t pay them).
The reality is each lending institution is going to have their own guidelines for how they lend money and at what interest rate. Obviously, the more substantial, positive credit history you have, the more banks you will have that will compete for your business (= lower rate). However, there are plenty of banks out there that lend money to people with small but clean credit files at relatively low interest rates.
Naomi says
That’s interesting. I guess I must be in that small population then, bc I do live in the midwest, and those things certainly were on my credit report at the time – and not for bad reasons. I worked my tail off when I was in school in order to pay for all of my living expenses out of pocket (and w/o credit except for a short 1 month stint which was paid in full). Good information to have – thanks for clarifying that information. : )
Meagan says
I can see how it would be a good idea for most people, or even some people, but my family lives on an EXTREMELY strict budget and we use credit cards (well, one card). It works for us. We pay it off every month and make several hundred dollars worth of rewards every year (it’s a fee-less card too). I will be able to completely fund our homeschool with the rewards alone, and because we follow such a strict budget, I don’t think the statistics really apply to us. To each their own, really. We won’t be changing our minds any time soon.
rhonda says
Going to a cash-less society has definite disadvantages. Here in Alabama, when the power went out after the tornados- Cash was King again! Without power, you cannot make any transactions with debit (or credit cards). The ATM’s that had power were swamped with people needing cash for gas, food and water.
While that was an unusual circumstance- things like that can and do happen…
Tedi says
Thanks for sharing the article! It’s so true! My husband and I have only 1 credit card that we don’t use, but keep because we bundle it with our home owners and car insurance. We have been off of credit cards for 2 years I think. It’s wonderful using cash. I also had heard that gas stations don’t get money from people who use cards because of fees, etc. Or they get a small amount and not the full price on what I paid.
Jessica says
I do agree with a lot that the author posted, and appreciate the fact that he didn’t say cash was the only way, only that getting rid of your credit cards can be really good for some people in many ways. A lot of us who follow Money Saving Mom already implement budgeting in our households, so going that far might not be needed. But since this was a Yahoo article, it’s aimed at the general public of America, and I think being money-conscious and having discipline in that area is something our country desperately needs. I think a lot of us on this blog are living outside the norm. My husband I use a balances cash/credit card system every month. CC for utilities/rent, and cash for everything else… I’m not worried about carrying cash, because I don’t carry my entire month’s budget with me. I keep it at home in our money envelopes, and then if I’m going grocery shopping, I grab $60-$100. If we’re going out to eat, we grab $40, etc… Extended travel is our only exception to cash, but we have the money saved up and spend within that. paying it all off when we get back. Sound moderate money advice needs to be given to the public. I cringe when I think of how much farther into debt our nation will be when the current kids are the adults and “CC can buy anything!” Some parents are teaching the value of the dollar (sounds like a lot of you are) but many, many parents are not!
chelsea says
For a long, long time we were the family that had one credit card and paid it off in full every month. We wanted to build miles to see my husband’s family once a year. We thought we were doing it the smart way.
Then we had a series of fraudulent charges on our card several months ago, and my heart has been turned against credit cards ever since.
Seriously, it takes FOREVER to get enough miles for a transatlantic flight, and the crap we’ve had to deal with with the credit card just isn’t worth it. We’ve had to pay a fee every single time we’ve cashed in our miles. We’ve had to deal with fraudulent charges 4 times this year (ugh what a headache). I was stuck with checking our account every single day to make sure everything was in order. If something looked fishy I had to double-check with DH to make sure it was him first, before reporting it. Then there’s the solicitations… we must have gotten at least 2-3 a month, from our own credit card company! Open this new account, transfer this or that balance… I hated it because our names were already on the checks they sent us, and anyone could pick the account info out of the trash and start up a card without us knowing.
The nail in the coffin was watching my parents go into financial ruin the past couple years, due to very heavy credit card debt and poor financial decisions. We’ll be taking care of them well into old age. I never, ever want to put that kind of pressure on my own children. Its cash only* for me!
*Disclaimer: I do use my debit card for gas. Seriously, I am not hauling my 3, 2, and 8 mo into the station for each fill up! 🙂
Aryn says
I haven’t found that it takes forever if you put everything on the card. Of course, we live in CA so our spending may be higher, but we put our cell phone bills, phone bills, cable bills, utility bills, basically everything we can autopay except the mortgage. With Amex, we also sometimes get double miles or bonus miles. I believe we accrue about 50,000 miles a year. I’ve only paid tax when using miles, not a redemption fee. You can stop the solicitations by registering to stop junk mail. Go to DMAChoice.org to turn off most of your junk mail. Then call the bank and tell them to remove you from all mail offers and stop all those transfer checks.
Candy says
Thanks for the DMAchoice website. I knew I had done it years ago, but forgot what it was and need to do it again, plus do it for my mom and hubby, too!
chelsea says
Our limit on the card was 10k. Anything over 3k and it messes with our credit. We never even approached that. We only accrued about 25k miles a year, and it takes about 100k miles to get ONE plane ticket. We have to buy 4 adult tickets for a family trip. Not worth it!
Michelle B. says
I hear you on the debit for gas! I just have a notepad in my wallet where I keep track of how much is left in the gas budget so I don’t go over.
Robin says
This is my new goal in life. My children have no concept of money and I’m not disciplined enough to make credit cards for emergency only. I don’t like the fees of a prepaid credit card so I will keep my debit card. But I need to get out of debt and after lots of reading (on this blog mostly) I realize it is possible to live without credit cards and loans. Thank you for all the work you do for people like me 🙂
Jessica says
Robin, it is definitely possible to get out of debt and is very, very freeing. One of the resources Crystal has mentioned is Dave Ramsey’s “Financial Peace University”, a weekly class where you meet with others and get to learn really practical money management and how to work on getting out of debt. My husband and I took it several years ago and it really helped so much! We’ve told all our friends/family to take it when they can. Keep following Money Saving Mom, and you’ll be encouraged by many other moms following this path, too! You’re not alone in it!
Naomi says
Wow, those are some great thoughts, things I have never thought about. We use a credit card on a very limited basis. This just made me even more glad we do that! I’ll have to show this to my husband tonight. Thanks for sharing!
Charity says
I love this article and the author makes some great points, but the typo “This not a step forward.” is driving me nuts! 🙂
Candace says
I was going into reading the snippet w/ doubts – mainly because the credit card pays us to use it – and we pay ours off each month. But this one little point alone makes a HUGE statement!
I remember the shock of seeing a bill from my husbands credit card company at the end of the year, on the first year we were married. It had broken down what he had purchased throughout the year into all these subcategories.
That bothered me, knowing that someone out there is keeping track of what we buy! Can’t wait to read the rest of the article, thanks for sharing.
Shannon says
I think the article was well-written and had a lot of great points in it. I recently flew during vacation and was shocked to see that the airlines now accept credit cards for purchasing snacks and drinks. I know it saves them time in trying to find change and most passengers don’t have exact change but it was strange seeing the flight attendants carrying their credit card machine with them.
I totally agree with the fact that if I used cash instead of credit cards, I would spend less. I find it much harder to budget with a credit card than if I have cash – I can spend more and the bill doesn’t come until the end of the month. My husband and I both have Discover cards and we use them to our advantage by paying them off each month and letting the cashback bonus accumulate. My husband has a great point, though, how much did you spend in order to accumulate the rewards?
While I’m not yet ready to cut up my cards, I do see the definite advantage of not having them. I’m just not ready to cut that umbilical cord yet!
Jennifer says
You need to be careful with those prepaid cards. First there are fees to load them. Then there are fees to use them. I received some for my birthday and when I tried to use them online they were rejected because not all places accept the prepaid cards. On top of that I was charged a $1 fee off the card for trying! A ripoff! I have found more and more places accept paypal which is another option for online shopping.
Rae says
yes I hate those prepaid cards. Some of them also have the fees per month that kick in after 6 (or 12) months. I got one as a reward earlier this year and didn’t realize that it would start losing value after 6 months (up until then I thought that if they did have fees it would be after 12 months) so I lost $3 of the value for one stinkin’ month! I know that some don’t have those type fees anymore but definitely need to be careful when buying.
Also, they can be a pain to use when using instore if you are buying something bigger than the card. Some places like Target, will take off the amount that is left on there automatically and ask for the remainder. But other places, unless you have them type in the exact amount (so you need to know the exact amount) when paying otherwise it will straight up reject the card.
Sheila says
I am a very visual person, so going all cash has really helped me. If it ain’t in my wallet, I don’t have it. It has cut down on my spending DRAMATICALLY. That said, my husband uses his debit card all the time, but it very good about tracking his purchases. I think it’s all about what works for you. If you’re good at paying off a credit card every month, then good for you. Most people aren’t. We aren’t. Better for us to stick to cash.
Mrs S. says
My family uses zero credit cards. While other families can probably use them responsibly, and pay off their balance each month my family is not in that position. A brain injury has created a compulsive spender in my family, and that makes owning a credit card dangerous. So while the perks are probably wonderful for some families, my family is better off finding other ways to earn rewards (swagbucks, store loyalty cards, etc…) Sometimes I am envious of families who can earn free air travel or other prizes, but at the same time I am always thankful that I never have to see a credit card bill (even if it is paid off every month!) The author makes some great points, and I think many families could benefit from the ideas presented, but each family being unique, there is no “one size fits all” solution 🙂
Cathy C says
Thanks for posting this article. I really hadn’t thought about who I am or am not supporting when I use my credit card. Great points to think about, I am certainly going to re-evaluate my reasonings for using my credit card.
Katie says
I have to agree with some of the comments that if you pay it off entirely each month then the rewards can be worthwhile. I actually have the rewards setup to deposit cash straight into my girls college funds. We pay for everything we can on the credit card but like others we make sure we have the money to pay it off upfront. I also budget and track every day our spending. I know this isn’t for everyone, but if you can stay on top of it, it can be free money.
Meg says
I agree! We put everything on the card, pay it off in full…every single month. We get lots of rewards, and most of the time we cash it in for even more $, like $40 in rewards for a $50 gift card. If you have the self-discipline, you can really get a lot in the way of ‘free money.’
Amy says
What I love to do is then use the CC’s shopping site to shop online where I bought the giftcard. For some reason, even though I am using a gift card, I still get the extra cash back from shopping through the CC’s website. So, it is even more free money!
(Should I say that quietly so the CC company does not catch on?)
Dee says
I agree. We put as much as possible on our credit cards. I can track every penny that way when I download our statements to Quicken. We run reports regularly to see where our money goes. It was how I knew I had reduced our grocery bill by 60% with couponing. 😉
We pay off the bill every month and get travel rewards that we have used to travel the world.
Frankly, I think this whole argument misses the point by looking at the vehicle for spending. Living frugally is a mind-set that is beyond cash or credit. If you overspend with credit cards, you are likely to be out of cash before the end of the month, too.
Linda says
I have not used a credit card since September 2007. I have never once run into a situation where the hotel or car rental place would not take my debit card. I use it everywhere, gas, groceries, online etc. Never had a problem. Maybe my results are no typical, but I think they are. People worry about it and stress about it. Just try it, then decide.
Rachel says
I like this article. I still look at purchases and think to myself “I had to work 4 hours to pay for this. Is it worth four hours of my time?” We didn’t know what credit cards were when we were growing up. I have two now and I’m paying the balances off and not charging anything else on them. My daughter who is only 7 thinks we have plenty of money since we have those cards. Once I told her we didn’t have enough money to buy something and she replied “Sure you do, use your credit card.” I stopped using them. I’ll keep them for emergencies since my savings account balance isn’t where I’d like it to be, but that is all.
My neighbor works in a bank and she says that people throw their change in the trash can! Why? Save it, roll it, cash it in at the bank. Every little bit helps.
Rae says
haha I would be going through the trash cans every night to get it all out lol
Rachel says
I don’t understand why people throw it away. We pick up change we find and just put it in with the rest. I did ask her if she ever went through the trash and she told me no. She might not have wanted to admit to it though. lol
Rae says
I know I am shocked. I have never seen somebody literally throw away money. I’ve seen people that don’t like change say keep the change, throw it in the donation jars, or hand it to a kid in a line but never throw it in the trash. My boys look for coins on the ground too to put in the cruise jar (that’s a family effort, we hope to go on our first real vacation ever in 2013) and if they saw somebody throw money away, I’m pretty sure they’d go try to pick it out 😛
Amy Hilton says
Personally, credit cards have been a lifesaver for my family. I normally only use them for emergencies, and I pay them off pretty quickly. If an appliance dies or an unexpected expense comes up, they are very convenient, because my family pretty much lives paycheck to paycheck right now.
JenK says
My husband and I used to have an overwhelming amount of credit card debt, due partly to unforeseen issues when we were younger and partly due to some shamefully undisciplined spending once we graduated from college. We will have them all paid off in the very near future (by the end of the year), so we are very excited and VERY unwilling to dabble with the debt again! We aren’t going to cancel them outright, but we do not use them anymore except for rare online purchases. (FYI: Many debit cards have different rules on identify theft, and it can be harder to recoup losses when debit cards numbers are stolen than when credit cards numbers are. In fact, we just completed a cross-country move, and in the middle of the trip, we found that one of my credit card numbers had been stolen. The company flagged it immediately because it was unusual activity, and while it is annoying that we had to put a security hold on the account until we find a place to live and have a permanent address, it was nice to know that they flagged it and that a simple phone call removed the purchases from our account. We try not to use debit cards online because they are not as easy to remedy in situations like this.)
One note about those credit card perks: They are a killer to small business owners. My mother-in-law owns a small business, and while she does take plastic, she hates it when people pay with those rewards cards. Who do you think pays for those “free” perks? The merchants do! The extra charge might not be a big deal to Walmart or Target, but to a small business owner like my MIL, the extra fees on rewards cards really cut into her profit. There are even some cards that actually cause her to take a loss if the customer only makes a small purchase with a card that charges her higher fees. She encourages my husband and me to pay with cash when we visit small businesses to keep more of the profit in the store.
Christine says
I just only recently learned this. It made me more mindful, in that I will try to use cash at local businesses. I heard about it from a new small business owner who had a $500 fee on their first bill. Apparently, they didn’t know about it either. I think this would make a good post from Moneysavingmom b/c I think it is important for small business owners (I am not one) and most people won’t read through all the comments.
Rae says
she actually has posted about that before 🙂
Rae says
here is the post 🙂
https://moneysavingmom.com/2010/08/credit-cards-they-can-hurt-more-than-just-your-own-personal-finances.html
Christine says
All right, thanks
Katie says
Yes, I did not know this until recently. My husband and I went on a drive through the countryside and stopped for ice cream at a little shop. We weren’t carrying cash and tried to pay with a visa (debit card). The shop owner said, “You can just have the ice cream for free. I actually lose money on that if you pay with visa.” I felt TERRIBLE!!! (I was already eating the ice cream or I would have given it back!). He said to just stop by next time we’re in the area and buy something. I’ve tried really hard to pay cash or check now when visiting small businesses.
Bill says
Small business owners can be hurt by interchange fees. However my simple reply is that no one forces them to accept credit or debit cards. They are allowed to require minimum purchase sizes for someone paying with debit or credit. They are even allowed to charge different prices for people paying with cash. If a small business owner is being hurt by the use of credit, it is their own fault for not pricing their products appropriately.
Rudi Pittman says
Unless the rules have changed Visa and Mastercard (not sure about others…I used to work for a credit card processing company) don’t allow a different price to be charged for cash vs credit prices in the contract the merchant agrees to. As for hurting small business’s….it’s part of the expense of doing business and in most cases they get to write those fee’s off on taxes…obviously the 3% cashback I get at restaurants when using my BUSINESS rewards credit card isn’t coming from the credit card processor.
Bill says
The rules have indeed changed with the Dodd-Frank Act.
“Effective immediately, merchants may offer discounts and other incentives for payments made by cash, check, debit card, or even by credit card, without interference from issuers, networks or a related parties (such as agents or other members of the network). The only restriction, beyond compliance with State and Federal price advertising laws, is that all similar types of cards (i.e. all debit cards or all credit cards) must be treated equally.”
In addition “the new law allows merchants to set a minimum dollar value for acceptance of credit cards, up to ten dollars, so long as that minimum does not distinguish between card issuers or payment networks. ”
http://www.retailersma.org/pages/1440_interchange_swipe_fees.cfm
Rudi Pittman says
Thanks for the update and links! That being the case any local merchant who wanted to save on merchant fee’s could offer a reduced rate for cash purchases…if my credit card is giving me 3% off but they offer 10% off for cash purchases I’m obviously going to pay cash. I also see nothing wrong with requiring a $5-$10 purchase to make the transaction worthwhile.
Google checkout and Paypal are a good example of merchant fee’s and due to low volume are typically HIGHER than what the merchant pays….google’s is 2.9% + $0.30 per transaction.
Kari says
Perhaps choosing the right debit card is important. Visa, for example, has one policy when it comes to stolen credit or debit cards. They offer exactly the same protection for both credit and debit cards.
I was the victim of a stolen debit card recently and had no issues at all with my bank refunding me the money as soon as I contacted them. It was immediate, which was really impressive.
Nancy says
There is no such thing as ‘one’ Visa card rule or debit card rule. Visa does not issue debit cards or credit cards, banks do. Visa is merely the clearing house, the go-between between your bank and the merchant. The bank sets the rules for what it will insure, reimburse or otherwise handle your debit card. There aren’t a lot of rules about what the bank can and can’t do. Credit cards are far more regulated, as they are in fact loans until you pay them back.
Credit cards and debit cards DO NOT operate the same way and while your bank my offer the same protections on both cards, they don’t have to. Usually, they don’t. If there is a dispute after a debit purchase, the bank normally won’t refund the money until the dispute is investigated, but if it is on a credit card they cannot, by law, charge interest on the amount until the dispute it resolved. For major purchases and for anything on line, use a credit card.
Many banks are in disputes now with customers on about the order that debit charges are processed. Many banks were ordering the daily charges from highest to lowest AND crediting deposits at the end of the day, so it was possible to run up a lot of overdraft fees for tiny little charges for $3 and $4. Most have stopped, and you can ‘opt out’ of overdraft but then your purchases will be denied at the point of purchase.
Bottom line – there is no right way, only the right way for you. If Dave Ramsay doesn’t want the free perks, that way is right for him. I want them. I never use my card as a debit card. I never write checks and leave them at places like a hair salon or small shop where I don’t know how the owners will treat and protect them.
But remember that credit cards and debit cards, even if they say Visa, are NOT the same.
Heather says
The author makes some good points. Anyone that is paying interest on CC’s or not sticking to a budget probably should go cash only. But his approach does sound a little Luddite-ish. And that’s coming from someone who is that way about some things (I refuse to send a text, rarely use my old, old prepaid cheapo cellphone, no Twitter, etc.). I see credit cards as similar to TV – a tool that can be used for good or evil!
Amy says
To say that someone should not use a credit card is to presume that person to be irresponsible. In the 13 years that we have been married, my husband and I have paid off our card in full every single month. It can be done! I personally enjoy the freedom and security that having a credit card gives me. For example, an emergency trip to the dentist yesterday cost me $305. No problem, just put it on the credit card, mail the itemized receipt to my Flexible Spending Account, and they will reimburse me the $305 before my credit card statement even gets here. Another way we use credit cards is for our gas purchases. We have a set amount of gas we need every month anyway, so we put it on the credit card, pay it off in full the next month, and get some “free” gas every month because of our credit card’s cash back rewards. Credit cards may not be for everyone, but if you stay on top of your expenses, I believe you can make them work for you, instead of against you.
flutemom says
well-said, thank you! i wish people would stop “throwing the baby out with the bath water”
Michelle @ Simplify, Live, Love says
I sympathize with this article. We do have personal credit cards but rarely use them any longer. We absolutely spend less when restricted to cash.
I’m wondering what you do about your business, Crystal. It seems easy to forgo personal credit cards, but more difficult on the business side. We are self-employed and use business credit cards quite a lot. They are paid off in full each month, but I have often wondered what it would be like to get rid of them too.
Samantha says
I can respect the author’s points, but I simply don’t agree with them.
Our house has a budget, and we stick to it. ALL of our purchases go on our credit card (even some bills!) and we pay it off every month. We can still track our spending penny by penny. I actually prefer it because I’m notorious at losing cash dollars, which of course is a huge waste. We would spend freely just the same if we knew we had extra cash in our budget.
I was a victim of Identity Theft, not because of credit cards…but someone used my identity to get loans a.k.a. real money. None of that was traceable (except initial deposit and withdrawal) and it was a nightmare for me to prove it was not me who got and spent the money. It took over 2 years to clear it up. There was 1 credit card, and it was literally taken care of within a month. I sent them handwriting samples, and proved to them I was not in the locations when the cards were used and it was totally removed from my credit report.
Dana @ Budget Dietitian says
I too was a victim of identity theft. It was also not due to a credit card. When I was in college, someone used my social security number to open a phone line and then didn’t pay their bill. I fought and fought it but it only was able to come off my credit report after 7 years.
Samantha says
7 years, how horrible! It’s such an awful fight. Completely exhausting!!
Jennifer says
I was also a victim of identity theft and it was not a credit card. When I moved apartments one of my checks was mistakenly sent to the old address and did not get forwarded with the rest of my mail.
Someone was able to get ahold of it and cashed it by forging my signature and writing my drivers license number on the check (still not sure how they accessed this number, but my guess is that it was someone in the apartment complex office which had it). The bank is supposed to require that they show picture ID, but in this situation they did not follow the policy.
I was finally able to prove it both by providing handwriting samples and by showing that on the date the check was cashed I had a new drivers license issued by the new state I was living in, and the old number which was written on the back of the check had been relinquished to the state when I got the new one.
Jamie says
We had paid off all of our credit cards and vowed never again when I found a blog that encouraged ways to use your credit card all the time to build up points and just pay it off every month. Well (you guessed it) I did not pay them off every month and now we have $15,000 in debt that feels like it will NEVER be gone. This time my vow to never have another credit card again will be taken seriously. I’ve learned my lesson!!! I might keep one for “just in case”, but if I do it’s going to be frozen inside a locked box while the key is frozen inside another box.
I say there are NO perks to credit cards that make them worth it. None.
Betsy says
We just paid off and cancelled our last credit card and with that comes a huge feeling of relief. Credit cards for our family are a trap, a never ending cycle of debt. The “rewards” are never worth the debt. The debt kept our family from saving, kept us having to use credit cards to make it. Now that money can go to paying off school loans (another regret) and building the savings that we should have. We are raising our kids to respect money and realize that credit cards are a scam, so they will not spend a portion of their lives paying off mistakes and be able to enjoy the money they make instead of sending it off to creditors.
Rae says
I think that going all cash is a good idea for most people that cannot control their spending. I however am very cheap and do not buy extra just because I’m using a credit card. I am even cheap when I am using “free” money (store credits, coupons for money off a purchase, giftcards given to me, etc) and try to make them stretch to the best of my abilities as well even if they were free to me. My husband is one that was spending more because it was on credit and he didn’t realize that $4 here, $5 there would add up to hundreds of dollars. At the same time he was not willing to part with plastic. My solution? I started tracking his spending in a spreadsheet and telling him that I was not happy with hims spending $_____ per month. He said there was no way but I broke it down for him by purchase and he said they were all his. I then showed him how those numbers added up to that large number. Now he is MUCH more mindful of his spending because he knows I am keeping track lol. I pay off the credit card at least twice per month (and our utility, cell phones, etc go there too to earn points) so we have only ever paid interest one time when we bought a big purchase years ago (and only for one month) and never again after that because now our emergency fund is where it needs to be. Even with credit, I am able to spend only $35 per month on food, pet, household, and toiletries for the family of 4. Then we eat out 1-2 times per month (with coupons!) as a family and my husband eats out (fast food) once per week as a treat. I spend less than $40 per month in “extras” (food, toys, etc) and pay for Christmas with survey money, mypoints points, etc. I think we are doing pretty well on plastic 😉 But I agree that for the majority of people (especially in this country), cash is best.
On another note Crystal, I just used an amortization calculator and figured out that if we continue to pay the same amount of extra payments on our mortgage that we have been (actually, I calculated less since we will be spending more when we move because of higher cost of living), we will be able to have our house paid off in 5 years or less! This was so exciting. My new goal is “debt free by 30” 🙂 We already have our cars paid off and no other debt (as well as a pretty cushioned emergency fund) so our mortgage is our biggest (and only) debt. This is a one income military (enlisted) family.
Milk Donor Mama says
We paid off our home in 6.5 years 🙂
Rae says
awesome congrats! 😀
Rebecca says
@Milk Donor Mama. We did too! Took us 6 years and 2 months. And for the first 3 years of that, I was single! We just got really focused about it and decided that a lot of things we wanted could wait. Now, 5 years later, we are still waiting on most of those things because we have decided that they are just not that important! We love being debt free! (But we still use credit cards – and pay them off in full each month). It’s so nice to read all these comments and learn that there are so many other people that are – dare I say – neurotic about keeping track of and being responsible with their money!
Dana @ Budget Dietitian says
WOW Rae. Paying off your mortgage would be amazing by 30 years old. I have no idea how you only spend $35/month for food, etc. I am impressed.
Rae says
hardcore couponing, eating less meat, using (for the most part) only the produce that is in season therefore on sale (and buying extra while at a low price to freeze), and just plain old saying no to a lot of things. My husband complained for a long time when I would tell him to use a microfiber cloth instead of a paper towel or to learn how to sleep without a blanket in the summer (I keep strict watch on our electricity and water spending too to keep those bills low) so we can keep our A/C at a higher temp, etc. But now that he sees that paying off our house is so close (even if it takes us the full 5 years, that’s under 9 years total), he is much more convinced that our little sacrifices are worth it. I didn’t take as much convincing because all I need to do is take a look at third world countries and see that I am still incredibly blessed 🙂
Dana @ Budget Dietitian says
We do most of those things too. Probably not as hard core with the couponing though! 🙂
I am right with you about looking at Third World countries and realizing how amazing that my family has it. Even a very frugal, penny pinching life here in the US is an amazing blessed one. I hope to use the extra money that comes with being finanically responsible to give to others.
We are also hoping to have our mortgage paid off in 5.5 years but we will be much older than you! 🙂
Shawna says
It can absolutely be done. Hubby and I made our last mortgage payment last month. I’m 27.
Dana @ Budget Dietitian says
Awesome job Shawna!!! That is so great.
Heather says
Just curious…where do you live that you can do that? I live in DC and our house prices are so ridiculously high that there’s no way we could!
Rae says
DC is very expensive. Being a 2 income household, no kids, no pets, and still living a frugal lifestyle didn’t hurt her I’m sure though 🙂
Shawna says
We live in IL. Our house was $147,900. I have no idea how that compares to house prices in DC.
Heather says
I am house hunting now…in a suburb that is about an hour and a half commute to my husband’s job, they run about $425,000 for a 3 bedroom single family on .25 acre.
Karin says
I live in Southern California ~ I can only dream of paying our house off early! Someday little by little 🙂 $147,900 wouldn’t even buy a bankowned townhouse ~ houses that need work are going for $250,000 – 300,000 and up!
Rae says
Congrats 🙂
Amy says
Yes, it can! I was 26 and my husband was 27 when we paid off our mortgage. That was the only debt we had. That was nearly 8 years ago and just last year we were able to build a house in the country debt free!
RandomCreativity says
I love the “very cheap even with “free” money” comment – I am always trying to stretch gift cards, etc, and hate it when I get one to an expensive store because it kills me to spend $40 on a bowl (or whatever) even if I am not paying for it 🙂
Rae says
lol yep me too! Kohls this year has sent me 2 $10/$10 purchase coupons and I searched the entire store’s clearance to make sure I was getting the best deal for my “money”. My sister was like “why don’t you just get the first thing you liked that was around $10? It’s just free money anyway.” Yes I could have gotten that one cute tee but I already have more than enough tees. After looking a while, I found a long, very thin sweater that I could wear with leggings (and I had been needing something long enough to wear with leggings that wasn’t too hot) on clearance. I also like to look for gifts (for Christmas/birthdays) when I get coupons like that. To me, money is money no matter where/who it is coming from and no matter what form it is in 😀
Toni says
We have one credit card. We use it sparingly, in several ways;
1. to build and maintain our great credit rating, something we value
2. to make checkout easier for us at hotels and rental cars (the card is already on file and we have already budgeted the amount in our vacation budget)
3. to pay for any purchase where cash or check is not possible (ie. on rare occasion, in an unfamiliar store, we plan to pay with check only to discover they don’t accept checks and we don’t have enough cash on us.)
Any time we encounter scenario #2 or #3, we immediatly write out a check for that amount to Visa and put it in our bill drawer. That way, when the Visa bill arrives, it is already covered. We do not ever pay interest on our credit card. For this, we are very grateful.
boyzmom says
I also use my credit card for almost all transaction and I do pay it off each month. I like the rewards I earn with my card. I have almost $1000 in cash back rewards that I can use. I guess it is kind of my emergency money that someone else is paying me. (I have my real emergency money in my savings account and mutual funds). I used to “buy” giftcards with my cash back and then would buy the kids their school clothes but now I purchase most of their clothes at Goodwill unless they really need something and I can’t find it, but then it is only bought new if I can find it cheap. I understand that concept of going Cash only. I just have a fear of carrying cash around like that. I am so paranoid that even when I go on vacation I leave my real wedding ring at home, I wear a CZ on vacation.
Milk Donor Mama says
Oooh. I like that idea about the wedding ring. My MIL lost her wedding band when she and my FIL vacationed in Hawaii 5 years ago.
Kristine says
I wear a cheap, plain, 10-carat gold wedding band from Wal-Mart. I’m glad that I don’t have to worry about losing an expensive ring. 🙂 I agree about the fear of carrying cash, though; I would be likely to misplace cash if I kept it in envelopes, apart from the possibility that it could be stolen, and I just find it difficult to keep track of spending with cash.
MombloggerJ says
I see her point, but one thing she fails to mention. . .with the new FICO scoring system, CANCELLING credit cards will likely damage your credit score. Maybe not cancelling one card, but the new system is based on an open credit to used credit ratio. . .and we all know that our credit scores in this day and age are really more important than even how much money we make when it comes to living “comfortably.”
While I do understand that credit can lead to all kinds of problems, I advocate using it wisely, which I realize many aren’t capable of doing. (Why not put your groceries/gas on the card every week and pay it off at the end of the month? I can pretend that money is already spent when it goes on my credit card. Then I get cash back (Discover), which for me totals around $600 a YEAR!!) AND I find I stick to my budget much easier with logging receipts for credit. With cash, I tend to lose track and it’s so easy to spend a dollar here, two dollars there. Then I’ve spent $20 with very little to show for it.
I also don’t think that a few people going back to cash is going to change the trend towards plastic. Kicking against the goads may make one feel better, but credit cards are here to stay.
Amy says
I agree with you completely.
We set up our monthly bills to be on the CC, as well as buy our groceries and gas, etc. It makes it so much easier to track during the month, and we love having the hundreds of dollars back every year. You have to pay for utilities and gas and food anyway, might as well get some money back!
Every time I have tried to go to a cash system, it has been detrimental. Maybe if one is less scatterbrained, it does not matter. But when you lose your envelope of grocery money or leave a wallet with $100 in a shopping cart, or have to go in the gas station to pay for your gas and have to schlep all your kids inside, the CC is so much better!
I do like the idea of the merchants getting all the money, though. And I hate people tracking my purchases.
Beth L. says
Having to go inside to pay for gas is the only reason I need to keep my cards! Such a pain!
Karin says
LOL I agree MombloggerJ and Amy ~ I always get in trouble with cash! Oh its only a dollar ~ its no big deal. I don’t know why but with CC ~ I watch what I spend. Not to mention that at places like Kohls or Target – they can look up a receipt if you’ve lost one when you use a CC or debit ~ for a return or exchange (wrong size, color, found better price, etc.)
Laura says
Personally, my husband and I prefer to use a credit card for most purchases. It helped us to have credit so that we could buy a house. (A controversial subject, I know.) But the biggest reason we have one now is the cash back rewards we get with Chase. In about a year, we had over $150 from the 1%-5% cash back rewards. We make sure we pay the card off every month, so we aren’t spending any extra money on interest. We also feel it is safer to use a credit card versus a debit card for online purchases. We’ve been told by friends that it’s much easier to get money back from a credit card theft than from a debit card. And, as a last note, my husband and I both prefer using cards instead of having a lot of cash in our wallet or purse. To us, it makes sense to use cards instead of cash.
Kristen says
I feel the same way about preferring cards over cash, I tend to misplace cash (or my wallet) when I have it. Plus, I am more willing to spend cash impulsively rather than charge, but I understand that many people are the opposite 🙂
Kristen says
Also, I feel like it would be very easy to write a good article titled “Ten Reasons NOT to Cancel Your Credit Card” lol
Mary W says
I couldn’t agree more. I find that when we use cash $5 or $10 dollars disappears rather quickly in small increments. We typically won’t make those same purchases if we only have our cards. We do use our cards responsibly and pay them off every month, while accruing cash back. We load the transactions into Quicken at least once a week and based on how we are versus budget we know where we have to cut towards the end of the month.
Charissa says
I agree. Cash disappears fast when it’s in my wallet. Having the card makes me think before I purchase.
Ambrosia says
“I find that when we use cash $5 or $10 dollars disappears rather quickly in small increments.”
I so agree with this! When I have a $20 or the rare times something bigger, I hold on to it forever because I always end up thinking over what I’m about to buy. When I have smaller bills it looks just like that, small, so it’s easy to say, “It’s just $5” but it adds up quickly.
Beth L. says
I’m the same way. I’m very “account balance” focused, so when I use my debit card I get a mental picture of my account balance dropping. When I have cash, it’s almost like free money. This is why the cash envelope system doesn’t work that well for us. We use it only for our entertainment budget so that when it’s gone, it’s gone, but we have a REALLY hard time making it stretch through the month. It burns a hole in our wallets way more than our debit cards do.
Robyn says
I feel that way too… like if there’s cash in my wallet, “oh, nobody will see that I spent this”… I actually am way more careful with my credit card because I know my husband will see every purchase that I make. That said, we do both use our credit cards like cash, and they never carry a balance.
Crystal says
To be fair, the only way to truly use credit cards like cash is to take the money out that you spend on them from your bank account immediately after spending it, transfer it over to your checking account (or whatever account you pay your credit cards bills from), not ever touch it for any reason, and use it solely for paying off your credit cards each month. Otherwise, you are banking on the future and could put yourself in a bad financial position if an emergency happened and you were unable to pay your credit card bills.
I much prefer a cash envelope system with specific cash designated for each budget category each month. That way, you never overspend — when the money’s gone, it’s gone! 🙂
Robyn says
Right, I understand that my definition of “using them like cash” isn’t technically correct… what I meant is that I’m just as careful and aware of what I’m spending than if I were to use cash (actually, I’m more so). I keep my receipts, and my husband keeps a spreadsheet and uses a number of programs to track all our expenses in…that is updated and checked by both of us religiously :-). We have a set budget that we don’t go over (and try to stay under whenever possible), though we do have leeway for emergencies such as doctor’s visits and such. I personally do not like carrying around a lot of cash, and I tend to misspend it if I know no one will necessarily track it. For us, using cash is fairly pointless since we’re both very careful. We regularly get gift cards using our cash back points, and use those when we dine out. It’s a win-win situation for our family, though I understand that it may not be for some.
melissa says
This is precisely what I do. On the rare occasions that I use the credit card (fuel, for instance), I immediately “take the money out” on my Quicken files. I make payments about 3 times a month to the credit card company and most of the time when I do make a payment, there is only one charge I’m paying for because I use it so rarely. I’m simply unwilling to use my debit card at the pump for safety reasons and I usually have my kids with me so I’m not about to schlep them inside to pay with cash.
Kristine says
I feel the same way. I would spend cash more impulsively than credit, and it’s harder for me to keep track of cash. With credit cards, I can keep track of spending online, and it’s much easier for me to be organized that way. Credit cards can be used responsibly and paid off each month.
Guest says
We use both cash and credit cards so I don’t really have a dog in this fight but I do want to point out that when you are on a cash ONLY budget, you would be very, very careful with it because when the cash runs out, it’s gone.
We’ve done cash only a few times and you definitely don’t throw cash around when you know that you won’t have money to buy milk before the following week. What I find challenging with our current hybrid is that if I run out of cash, I always know I can use my CC or get more cash. We’re also careful so it isn’t that we’re spending ourselves into debt but we’d be saving more if we would do a true cash-only system.
Carrie says
I really feel that it’s smart to hold onto your longest standing credit card and use it periodically, if only on autobilling a regular expense such as your electric bill. Sure, ideologically you may not want to use credit, but do you want to close off the possibility that your family may someday NEED it by failing to establish a credit track record?
Claire says
My husband and I don’t use credit cards. However, our credit is awesome simply because we pay our bills on time. When most places want to see your credit and you don’t have a card, they just ask for copies of your bill payment record (like for utilities & such that can be found online). All I know is that this has worked for us. Hope that at least starts to help answer your question about establishing a credit track record.
Carrie says
Claire,
It’s not a question, just a statement. It’s great that you have awesome credit, but a perfect 800 score is very rare so it’s likely you could improve it even more by establishing a credit card record.
You can also think of it as diversification for security. Just as having multiple streams of income is safer than relying on just one, having multiple ways of proving you’re creditworthy could help you if something happens and you slip up in another area.
This link explains how the length of your credit history improves your score:
http://www.pueblo.gsa.gov/cic_text/money/creditscores/your.htm
Courtney says
My opinion is that the people (companies, banks, etc) that are telling you that you have to have a good credit score are the same people benefiting (making tons of money) from you trying to build it. I think it’s all just priorties , choices, and education. If your not using credit you don’t need a credit score now or later. You CAN get mortgages without having years and years of open credit card accounts, but that fact is not going to be advertised by anyone looking to profit from your attempts at building credit.
Claire says
Thanks for the link. That was helpful to look at. I can see how having the card would help boost the score for those that need credit & therefore need a better credit score (although it only helps with about 10% of the overall score, that still can help!). I think it comes down to each one person/family weighing their options & seeing what’s best for them & what benefits them most financially depending on the situation they’re in. However, (yes it’s ideal) but I still think it’s best to try to follow Dave’s advice- if you start off with no credit cards, pay your bills on time, build up an emergency fund, and budget wisely, then there really is not a need for credit & no need to hassle with the cards. But, of course, that’s not always the case & each family needs to make wise decisions about what works best for them.
Rachel says
We also have a credit card just for some of our reoccurring (same amount every month) bills. We then pay the whole amount each month, but it keeps the card active to build up our credit.
We are still building a down payment for our house, so this is helping us establish what our bank considers a “good credit score”. (I know it doesn’t work that way for everyone). And since it is only our monthly reoccurring bills, it keeps me from overspending!
Simone says
I think it’s a great idea! With the banks mostly not playing fair and charging us out the wahzoo in fees for just about everything, to living within your means, getting rid of credit cards is the way to go. We are down to one credit card with a very small balance (hoping to make it zero soon!) that we use for emergencies. Other than that we are credit card worry free. It is such a big monkey off your back not to have to worry about credit card payments, interest rates and just getting ripped off by the credit card companies. You can actually breathe!
Paying is cash is always great, because you can only spend money you have.
Candy says
Hubby and I are learning the hard way to go without credit. I lost my job 13 months ago, and he was unemployed for 3 months earlier this year. We didn’t have any savings, so we were forced to file bankruptcy.
My new question is how do you reserve a hotel or rent a car without a credit card? Many of the hotels put HUGE holds on a debit card, and some places don’t take pre-paid cards.
Claire says
About the hotel question- we only use our debit card. In fact we use our debit card for most all of our purchases because that’s what works best for us. (But we DO keep track of how much we spend each week in each of our budgeted categories so that we don’t overspend our budget). Anyhow, we always make sure that we have enough saved up in the vacation/travel category before we reserve the room. That way the “hold” on the account doesn’t matter & we already know that the hotel is paid for & that leaves no need to worry about if the money for the hotel will be there in the future;-)
Naomi says
Candy, that’s the one reason we still have 1 credit card, because of what hotels do to debit cards. They will try to tell you it’s the bank and not them, but it’s them. I have a friend who is the manager of a bank and she’s told me they would never do this. Anyway, I agree w/ you! If it wasn’t for that one thing we wouldn’t even have 1 credit card.
Amy says
We just had this problem on our road trip. However, we found a number of chains that don’t do this. There is one big chain that we like, but only stayed there one night because of this issue. The other 16 days we stayed at chains that don’t. Usually, the ones that do this have assorted “extras” that they are hoping you use. To encourage hotels to stop this madness, we are boycotting them as much as possible and I am getting ready to write to “that chain” and explain why after all these years we will no longer use them. We don’t want to encourage plastic dependence.
beth b says
I think it boils down to balance and what works for you. We use credit cards for some things, never carrying a balance month to month, but we also use cash for many of our purchases. I freely admit I probably spend more at Kohl’s than if I didn’t have their cred but it’s not a huge problem in our overall financial picture. And I’m learning to be more mindful.
Although I am *very* disturbed about some retailers not accepting cash. That is a step backwards. Reminds me of a meeting at our bank when they thought I was insane for not getting overdraft protection on our debit card. This would luck in after both our checking accounts were drained. The banker was shocked I didn’t want transactions approved under those circumstances. Are people really that misguided?
beth b says
That would be KICK in, not luck. Autocorrect!!!!!
Rudi Pittman says
I was under the impression it was illegal to refuse to accept U.S. Currency for payment in USA….that seems to be what I recall from some places that refused to accept pennies some years back.
Ambrosia says
It’s not illegal. They have to accept “Legal Tender”, but they can decide which of the acceptable one(s) they will use. Even if they do accept cash they can put their own conditions on it, like the place can not accept $50 bills. The only exception is is there is a state law overriding these policies so it may vary.
Frugal Momma @ Live Joyfully says
I think this article has some very valid points, but I also believe that each family has a different situation and there are responsible ways to use credit cards, and irresponsible ways to use cash. I don’t think it’s all-or-nothing. If you’re using a credit card to buy things you can’t afford, that’s irresponsible and you should absolutely cut them up. If you use credit cards to build up a credit score or get benefits and pay it off COMPLETELY every single month, and still keep a stringent watch on your budget, I don’t see any problem with that. When we use a credit card, we treat it the same as cash. If it’s not in the budget, we don’t buy it. Period. Some people have that self-control. Some people don’t. And, I think everyone needs to choose what works best for them.
Melodie says
Ditto, Frugal Momma!
Sorry, Crystal. Still not convinced. I see the potential for bad when it comes to credit cards, but I’m afraid I still do not believe that it outweighs the potential good for those of us who use them thoughtfully.
If it helps though, I do admire your tenacity in the face of such opposition. 😉
Heather says
I enjoyed the article and the author did make some valid points. However, I would disagree about the perks. I just used airline miles for two free round trip tickets and I have over $640 worth of Disney Reward Dollars that will be used for our upcoming trip in November. With that being said – I probably don’t handle my two credit cards like most people. I treat them as a debit card. I use them to pay for just about everything and that money is moved into into an account the same day that I use the card. When the balance is due, I use an electronic transfer system to pay for credit card in full. As a matter of fact, I usually set up the payment way in advance to be drawn the day the payment is due (I keep the money in as long as possible – even throug interest rates are low, I still earn something the longer I keep in the money) But that is me and probably not the norm. Because I know I have to take the money out once I use it, I have never been tempted to purchase something that I could not pay for up front – cash in hand.
Lynette @ Cleverly Simple says
I also disagree about the perks mentioned in the article. We use our credit card for all our gas purchases or travel purchases throughout the year. We have a card that gives us a cash percentage per purchase. We keep all the cash with the credit card until November and then they send us a check. We use that check to buy all our Christmas gifts each year. It’s like getting them for FREE! Of course, we pay off our credit card each month and accrue NO interest. If we weren’t able to do that each month, the benefits would be non-existent.
I will say for everything else we use a debit card or cash. It helps us to keep our monthly bills in check. I will say that I do like to use cash and know that no-one is watching what I spend. It’s kinda creepy when you think about it.
Thanks for the article. It was an interesting read!
Toni says
What kind of accounts do you use to move the money from one to the other? I might be interested in doing this.
Heather says
I use a savings account. My bank offers several types – the one I use for my credit card payments offers the least amount of interest since there is no limit to how much money we deposit or take out each month but at least it earns a little interest ………..I only use this savings account for credit card payments.
I move the money that is deposited in our checking account (pay checks are deposited right to checking) to this savings account doing online banking. That makes it very easy to keep track of my transactions.I also use online payments for my two credit cards (they are both from the same company) The savings account is the one linked to my electronic payments for both cards.
Hope this makes sense.
Toni says
Thank you, it makes complete sense. My dh and I are considering doing this now. I have some loved ones who are not financially responsible and I can see where this could be a disaster for them. However, we are very, very responsible with our finances and I know we can use this sytem to our benefit. Thanks for elaborating.
Kimberly@Intentional Mom says
What bank allows you to do that? Pretty clever!
Kimberly says
What bank allows you to do that? Pretty clever!
Sunny says
We use WellsFargo and are able to move funds between accounts quite easily. We have been quite happy with their online banking for over 10 years now. All accounts are linked *even the kids* and you can manage everything from home on a PC.
However – as we found out in June, they have a maximum transaction limit on savings accounts. You can move money at a WF ATM or a WF branch without penalty, but moving it online more than 3 times in one month creates a problem and we were charged an overuse fee.
Karin says
I agree Heather – I use my credit card to earn rewards back/cash depending on what benefits me more @ the time. I also pay it off in full each month. Its auto-paid so I never accrue late charges 🙂 It keeps my credit score up and I get the bonus of the rewards. I don’t think I could ever use cash for everything.
grace says
I love my credit cards, but the moving the money with funds transfer is an awesome idea!!
Kimberly says
Thanks, Sunny!
becky says
I think it is an excellent article and lots of very true points made.. i will go in kohl’s and use my card to spend $300 alot quicker than I would cash. And I know it is dumb. But it is a bill and I never pay my bills late so I know I have to pay for it when the bill comes in.. If that makes any sense
Peaches says
Becky,
Coming closer to spending 300 dollars using a card is probably why the author got rid of her cards. If you see the cash money leaving you hands, you will have second thoughts and not spend if you really don’t need it. The card makes it easier to spend since you really don’t see the dollar bills.
Jessica says
I love using cash when purchasing goods at small businesses for the same reason the author explained – more money goes to them. However, for me (and probably most of America), it’s probably not smart to go all cash. HOWEVER, you should all cancel your credit cards!!! Going all cash would mean giving up my debit card, which is just like using a checkbook. So I would wonder if this author is giving up her checkbook in addition to her debit/card cards. Personally, I am never giving up my debit card. It’s safer than cash. Someone steals my wallet full of cash – I’m just screwed. Someone steals my wallet with just a debit card – I can cancel the card, reorder a new one and never have to have money stolen from me!
Erin says
Jessica, if someone steals your wallet for 1 hour they can rack up $1,000s in charges on a debit card. In that way, I think a credit card is the safest of all – you can dispute every charge. I know people who have had their wallet stolen and it’s a huge hassle to have to dispute charges that were fraudulently made with a debit card.
Xazmin says
I had my wallet stolen, and had over $600 racked up in fraudulent charges on my debit card. It wasn’t a huge hassle to dispute the charges. All we had to do was take the list into our credit union, sign something, and they deposited the amount back into our new checking account.
jessica says
ditto that.
Kari says
Actually, I’ve had the opposite experience. My debit card was stolen just 2 weeks ago and my bank refunded every penny that was charged as soon as I notified them. There was absolutely no delay.
Debit cards and credit cards have EXACTLY the same protection. You can check out Visa’s website, they have one policy for this sort of situation that applies to debit and credit cards alike!
Becky says
You just have to be sure that if given a choice at a register, you choose CREDIT rather than entering your pin number to receive the protection from Visa/Mastercard.
Kari says
Yes, thank you. Isn’t that crazy though? I wish banks required a PIN # in order to use a debit card. I think it would put an end to the successful use of stolen debit cards, for the most part, if a PIN # had to be entered at the register!
Amy says
If I’m using my PIN it’s not a fraudulent transaction. A thief would run it as a credit, they shouldn’t have your PIN, and that would be protected.
Rachel says
In my experience, the protections on a debit card are given by the issuing bank, so it’s up to your bank whether or not they refund the money if you dispute, and they can take as much time as they want to refund it. Even if they are willing to refund the money, it could be weeks before you can access it again.
If your debit card is stolen, your current money is at risk. With new skimming technologies, a fraudster could access your debit card and pin number just by standing next to you or putting a device on a gas pump reader, head to the nearest ATM and clear out any and all accounts accessible through that ATM in 10 minutes flat. You may not even have time to call the bank before the money is gone.
I never use debit cards anymore–they just aren’t safe. And I would NEVER use one online. Ever.
Alaine says
I’m not sure how anyone would be able to clear out my bank account using an ATM – every debit card I’ve ever had has had a daily limit, usually in the $200-300 range. On top of that, if they were to use it at an ATM, there are cameras there, so disputing it shouldn’t be a problem.
Rachel says
Again, I think it’s probably dependent on your bank or your bank’s policies. I’ve withdrawn $3000 in a single day from an ATM (to purchase a car). Sometimes it just requires scanning your card again.
Agreed that if your money is stolen at an ATM, the videos will corroborate your claim that the money was stolen. Most banks won’t give you any trouble for that. However, the point remains that until the bank refunds or replaces your money, you’re still out the money. This can potentially trigger checks bouncing, overdraft fees, etc. While working with your bank will often get these reversed, it’s still a colossal hassle. I’ve heard of banks taking 6 weeks to return a person’s money. Maybe uncommon, but still not possible if using a credit card or cash only.
saph @ frugal wife blog says
LOL no one would be able to rack up anywhere close to even a hundred dollars with our debit card. It gets declined whenever there are insufficient funds whether you hit the debit or credit button at checkout cause there’s only enough funds in the account for the time of our purchase. We transfer funds by phone if we need more.
queuepawn says
If you use a VISA DEBIT card at the store, but send it through as CREDIT (meaning you DON’T enter a pin and you sign as if it were a credit card), you are protected just like it were a credit card. You can dispute the charges and the bank will repay your money. You will be out the money until they finish their investigation (and refund the money), but you will get it back. Yes, it’s a hassle, but at least you’ll get the money back.
Laura says
Agree 100%. If someone gets your debit card number, they can clean out your bank account, and it’s very difficult to recoup the funds. With a credit card, your bank account is untouched, and you can dispute the charges much more easily. I never use a debit card when making online purchases for this reason.
Emily says
About a month ago, I had my debit card number used fraudulently at a Walmart (not in my state) for over $400. Within 7 minutes of the transaction, my bank had cancelled my card and called me to notify me of the suspicious use. They were able to cancel the transaction before it posted to my account, meaning I was never out that $400. The only part that was frustrating to me was that, until I had received the new card they ordered me (which took about 1 week), I had no debit card and had to use either cash or a check. Other than that, I had absolutley no trouble.
Donna says
Hi Emily. That sounds great, but what if you were on vacation, and that was your charge? Would they have tried you on a cell phone number (if they had it) if they hadn’t reached you at home? Can you imagine if they had left you stranded in a different state because they canceled your card, albeit in the name of doing good? That’s kind of scary. I’ve had my bank tell me that I have to call them in advance to let them know when I’ll be away so they’ll know that I’m the one making charges in different states. To me, that’s not much different than if I hung a “Gone on Vacation” sign in my living room window. Come rob me, all who see this!
margaret says
great point!, If I’m going out at night and I know I’m going to be spending a lot of money, I feel so much better having a card that I know I can call and cancel then to have $300 dollars and loose it at a bar or on the subway or something like that!
Crystal @ Counselor Mom says
Say hello to your credit score decreasing too. I believe if you cancel and close all credit card accounts that it affects your credit score. We have credit cards but have not charged in over 2 years because we are paying off debt.
Amy says
It’s true 🙁 We are loyal Dave Ramsey fans, but this is one area where he and the current financial system don’t jive. We just bought a new house and got a higher mortgage rate because of our lack of credit cards. Our broker likes Dave Ramsey as well and feels that it is unfortunate that debt-free people are penalized in this way, but it’s the sad truth. It’s great to be debt-free and we wouldn’t go back, but we were bummed about our mortgage rate.
Courtney says
My husband and I are also huge Dave Ramsey fans, and we have kept our credit cards open with no balances. Our Sam’s Club card just charged us for a membership renewal for $100 – I would never have known but just happened to check my junk mail and found an email talking about E-Values that were added to our membership, which should no longer exist. I don’t feel safe having credit cards and I’m canceling all open accounts. I’d rather take the credit score hit. Remember what he says – a credit score means you love debt. We aren’t homeowners and this will probably effect us in the future when we do buy, but I’d rather be debt free and have a little harder time getting a mortgage or take longer saving up to buy with cash like Crystal than be in debt any day!
Lindsay Stewart says
But…Sam’s normally does charge you a yearly membership fee, unless you asked to close it. If you didn’t close your account, why did you think they wouldn’t charged you the fee? Also if someone has 20k in credit from open credit cards doesn’t mean that they are going to go out and max it out. I have excellent credit and have about 10 credit cards open and use all them for gas money on a monthly basis (different ones for different months) and pay them off, don’t see what the problem with that is.
Courtney says
Of course they charge for their memberships but we told them we did not want to renew our membership this year. They charged us anyway. What other people choose to do with their credit cards is fine for them, but we prefer to pay with cash and like not having to worry about making payments, even if we pay in full every month.
Heather says
Yes! No one tells you this! We thought we were being smart by cancelling two of our credit cards with the largest spending limits when we moved overseas. Turns out that our once stellar credit score took a huge hit by doing that. We then needed to beg for credit when we returned to the US.
Also, cancelling the cards didn’t protect us from fraud either…we received a bill in the mail about 3 months after we cancelled our Visa card with $6000 in charges on it from Arizona (and we were living in New Zealand)! We called the company and we weren’t liable, but it makes you think about what kind of fraud comes from the “inside” of these companies as well.
Bottom line…keep the card, just don’t use it!
Becky says
I agree with you about the fact that your credit takes a hit when you cancel credit cards, but if you follow Dave Ramsey’s plan, the only thing you may need your credit score for again might be a 15 year mortgage. You can go through a company such as Churchill Mortgage who will do something called “manual underwriting” to approve you for a mortgage. What this means is that an actual human (imagine that 😉 will sort through your credit history/bills/income/net worth to see if you can qualify rather than relying on these crazy “I love debt” scores. Just something to think about… it’s a total paradigm shift.
Amy Jayne says
“Bottom line…keep the card, just don’t use it!”
Bingo! As a “former” accountant now stay@home mom…this is spot on advice! 🙂 If you ever decide you are going to finance something as big as a house you will need to look attractive to lenders and when the amount of available credit goes down when you cancel those cards, so will your credit score. When that drops it is very hard to get it back to where it was once before.
Bri says
Actually, not using the card will actually cause the issuer of the credit card to close your account. After about 24 months of inactivity, most credit card companies will deactivate your account, which is worse for your credit than closing them yourselves.
Sheila says
Depends on the card. If you haven’t been using the card anyway then the amount of credit probably hasn’t been climbing and a $1000 limit isn’t going to affect you as much. I know my Best Buy card got closed for this reason and it didn’t have much of an affect, but I guess it depends on just how much credit you have.
Megan says
You’re right about this! The important thing to remember is that you should never close your OLDEST credit card. If you have newer cards, it won’t hurt your score as much to close them, but you should never close your oldest account (unless you truly are never going to take a loan again, except for a manually under-written mortgage). Having a long credit history is an important ingredient in your credit score.
Ash says
We charge as much as possible on our cards because we A) pay them off every month (without exception) and B) earn free stuff through a points system.
For example: we saved for having our 2nd child, used our credit card at the hospital and doctor’s office, paid off the card when the statement came, and ended up with a high-end camera, new pots/pans, a new grill through the card’s reward system.
If we weren’t able to use them in this way, I would cut them up immediately because I refuse to pay someone interest so I can have stuff before I’ve saved the cash for it.
Meg says
Our credit card pays us close to $500/year in rewards for doing nothing we wouldn’t do already. Am I going to get rich off it? No. But it’s money for doing nothing, which I appreciate. I have tried using Perkstreet, which is a debit card with a good rewards program, but charges are so slow to post that I find it very hard to effectively track spending, requiring me to keep a mental ledger.
The other thing I like about my credit card is that it is very easy to track my spending by downloading the transactions to mint.com. I prefer this to other budgeting systems.
I am going to try carrying cash and envelope system, but I’m not sure I like it.
Rachel says
You have to be careful about that though if you’re still concerned about your credit score. Having cards but not using them could effectually close the accounts–the bank may close the account just from disuse. The suggestion is to pull out the card every 6 months and charge a $5 item on it just to keep the account active.
KimH says
You’d best make sure they’re still active.. Most retailers will have shut them down for non-use. Just using them occasionally to keep them active usually prevents this… but it sure didnt work with American Express Been there, done that. 😉