why you shouldnt use plastic

Discussion in 'Back to Basics' started by beast, Jul 11, 2011.

  1. beast

    beast backwoodsman

    reasons-cancel-credit-cards-smartmoney: Personal Finance News from Yahoo! Finance

    10 Reasons I'm Cancelling My Credit Cards

    <cite> by Brett Arends
    Friday, July 8, 2011</cite>

    provided by
    The Treasury may be printing fewer dollars, but I'm going all cash.
    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.
    <table style="border: #d7deee 1px solid; margin: 10px" align="right" width="40%"><tbody><tr><td style="padding: 10px"> More from SmartMoney.com:

    What Your Credit Card Won't Let You Buy

    How to Check Your Credit

    The New Best Credit Cards</td></tr></tbody></table>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 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.
    [Click here to check current credit card offers, including rates and terms.]
    Here are 10 reasons why:
    1. I'll spend less. A variety of scientific studies, such as this one at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.
    2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.
    3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.
    4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.
    5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.
    6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).
    7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.
    8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.
    9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).
    10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.
    Hispeedal2, VHestin, Cephus and 4 others like this.
  2. mysterymet

    mysterymet Monkey+++

    Great post. Its much better for keeping companies out of your business! Same reason you should never buy beer with your shopper value card.
  3. Witch Doctor 01

    Witch Doctor 01 Mojo Maker

    11. Cash is harder for others to track than plastic...
  4. FTG-05

    FTG-05 Monkey+

    Dave Ramsey for the win!

    One of the best things my family has done in the last 10 years. Highly recommended.
  5. Hispeedal2

    Hispeedal2 Nay Sayer

    The real question is "why should you use plastic?"

    +1 for ole' Dave ^
  6. Gator 45/70

    Gator 45/70 Monkey+++

    +1 for da beast...I use cash too get price reduction's when paying for example ..having my tail gate repaired...Guy quote's me $325.00...
    I'm like hold up horse fly...I have cash..give me your best price and no paper work price...I have never paid the original quoted price given to me...Even when buying a 48qt igloo of shrimp...I say to them..I need your ''cash'' price...Shrimp are good..
    beast likes this.
  7. VHestin

    VHestin Farm Chick

    We've always been a cash household, with the simple exception of a JC Penny's card over 15 years ago that was a horrible mistake. And one business we frequent, cash customers got entered into a drawing, and mom won a firepit! Also won S'mores ingredients, or we would have if one of the male employees hadn't eaten the chocolate! And nice scoreboard pic Gator!
    Gator 45/70 likes this.
  8. wags_01

    wags_01 Monkey+

    My wife and I just paid off the last chunk of the 20+ grand we had on our credit cards after grad school. I cannot tell you how good that feeling is.
  9. Seawolf1090

    Seawolf1090 Retired Curmudgeonly IT Monkey Founding Member

    These days, one pretty much must have ONE credit card. I keep one with a limited credit amount, and do use it for gas and sudden needs, and the occasional online purchase. I do not keep a lot of cash on hand. I like to hit the gas station, swipe-gas-go! No need to enter the store - works for me. I pay it off each month. The convenience is worth it. I also keep a close eye on it online - once had an unauthorized purchase and had to do a fraud alert.
    Years ago, I did get into CC trouble - went through Heck andlearned a big lesson - so I keep a very tight rein on it. But it is a good tool when used right.
  10. sarawolf

    sarawolf Monkey+++

    Oh wow congrats to you and wife.[applaud][applaud]
  11. emh1701

    emh1701 Monkey+

    I completely agree with you. I've shredded all my credit cards. Paid off the big debt last year. Now working on the little ones. Credit cards are enslavement, pure and simple. I use my debit card or cash now. If I don't have the money, I don't buy it.
    BackwoodsmanUSA likes this.
  12. melbo

    melbo Hunter Gatherer Administrator Founding Member

    I've been debt free since early '08.
    We don't have any credit cards, no accounts anywhere, nothing.
    We've set up a zero based budget where we spend every dollar of each paycheck into envelopes.

    This has erased about 90% of the marital stress/arguments we used to have.

    It took about 6 months of tracking every penny spent to figure out where it was going and what budget 'accounts' we needed to set up, but it's so nice knowing that when the truck needs new tires we just go to the 'tires' envelope and the cash is sitting there.
  13. BTPost

    BTPost Stumpy Old Fart,Deadman Walking, Snow Monkey Moderator

    I may be a "special" case, but I have had multiple Lines of Credit for our Bruce's Trading Post operation, for multiple Decades, and still keep them open and viable. We ALWAYS pay off the balance, within the Grace Period, and NEVER incur any Interest, on ANY of these accounts. This is just good Business Practice, and it is nice to have that safety net, with 30+ days should a Financial Emergency arise, in short term Cash Flow. I used one of the Major Lines of Credit, when a 10 acre parcel came available, in my Close Neighborhood, for a good price. It took "Me" two years to pay it off, but it was a lot easier to use the Line of Credit, than to get a loan on Wilderness Land in bush Alaska. At the time, the Interest on the Line of Credit was 9%, where the best loan I could come up with was 12%. That transaction only used about 15% of the Credit Line, and it also basically set the rates for the rest of the Credit Lines for the next Decade. Since the "crash" my Banks have tightened up on these some, but I still have 6 Figure Total, should I need them. If you can't manage your money like Scrooge McDuck, then No Credit is a wise move, HOWEVER, if you can hold the line on Financial Responsibility, and can make wise decisions on where, when, and how to use credit, it can be a good tool, and be used like any other Tool, in your financial toolbox. ...... YMMV.....
  14. melbo

    melbo Hunter Gatherer Administrator Founding Member

    I'm so Scrooge McDuck that I have a problem paying 9% interest when I could just pay upfront...
    Not many people are as diligent in paying off debts each month as you and I bet nearly 99% fall into the debt trap by thinking they can manage the game. Then the car breaks down, the furnace goes out, funeral trip cross country, Christmas, etc.

    I have cash to cover all of those things.

    Even when I was into buying and selling land and homes, I drew off my bank account rather than borrow after i built up a large enough egg.
  15. Avarice

    Avarice California Health Junkie

    I own a retail health food store, I wish everyone would switch to cash. The banks make money from your interest, but I pay each time someone pays with a card.

    I pay Visa/MC and Discover about $300 a month in credit card fees, not to mention that the business owner pays for those stupid flying miles, NOT Visa or Discover...thats an additional $100-$150 out of my pocket.

    The banks are leeching money out of the economy, and they make big bucks when you use your card.
  16. Metalsmith

    Metalsmith Monkey+

    Cash only here, but I keep a few hundred on a prepaid visa debit card for online purchases.
  17. I totally agree with. However, i would'nt cancel my credit cards. I used to be a credit analyst and the worst thing you can do is to close credit lines. Big negative to the credit agencies. I keep the cards but never use them. Cash is king baby!
  18. Tikka

    Tikka Monkey+++

    Plus paying cash usually gets a discount. :D
  19. beast

    beast backwoodsman

    credit is the disease thats killing our country
    its very viral and very mutative
    it doesnt care who it affects or infects
    it just keeps growing and consuming
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