By switching to only paying for everything in cash, as we wrote about here, one family ended up spending 24% less in a month, $1800 less. To get there they cut up 8 of their 9 credit cards. The last one they froze in a glass of water in case of emergency, another technique we recommended before. “I don’t have enough money in my purse to go buy this new dress or this new shirt that I want, so you don’t even step foot in the store, because you don’t have the money…You don’t make all those extra purchases that you really don’t need.” Marissa Farhat told Good Morning America.
Paper or Plastic? Family Saves With Cash [ABC via Blogging Away Debt]
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While I agree being responsible with a credit card is better than cash, this family is now on their way to learning that responsibility, so this is definitely a good story and one I hope people will follow. Hooray for people converting towards the Consumerist Way.
I’ve commented on this subject quite a bit in the past. I’d like to share my opinion here.
1. I cut up my last credit card a few months ago. I did this for several reasons. First, I think they are lousy organizations. Sure, you can get “Rewards”, but the minute a mistake occurs, they will force you to the binding arbitration clause. Just try to go to court over a discrepancy: You will lose, 90% of the time.
2. Those of you who think you are smart & clever for using a credit card for “Reward points” or cash back, well, I hope you never have any fraudulent charges or ever end up on the wrong end of their legal department. We’re all dodging lightning bolts here, or don’t you read the articles here about how for instance, BOA re-opened a guys’ card after 10 years?
3. These companies market debt, and I oppose them on a moral level. You think you’re outsmarting a multi-billion dollar industry who probably have teams of individuals, figuring out ways to make more money? Right.
4. I don’t like the idea of putting a credit card in the freezer. If you have to acknowledge that have that much of a lack of self control, then you should cancel the card.
5. Some people keep credit cards for emergencies. It gives them a sense of security. This was my case, and I actually experienced a pang of anxiety as I sat on the verge of closing my last credit card account. At that precise moment, I knew that this thing held an emotional hold on me, and it made me angry that such a thing could have such power over me. I destroyed it.
I dare you to try it. See if you elicit an emotional response within yourself; a pang of second-guessing, a feeling of reluctance based on emotion, as you sit on the phone with the rep on the verge of canceling the account. I am really curious to know if anybody else experiences this.
I have lived through all stages of a credit-card-owner, and I am very happy to have finally graduated to the level where I am completely non-dependent on them.
Gee, I’ve only had one credit card for the last 20 years….and survived!
Cash is best when totally undocumented.
@Fist-o:
1. What kind of mistake forces you directly to binding arbitration? I’ve mistakenly paid credit card bills late, but I can count with one hand the number of times this has happened in the last several years. Each time it took one phone call to customer service to have the late fee waived, as well as any other finance charges that accrued.
2. I’ve had one fraudulent charge on my card: a $5 charge for a Starbucks in Los Angeles while I was in San Francisco on business. One call to customer service had the charge waived, no questions asked. And I had a new card with a new account number in about a week.
3. Credit card companies know there are people who they lose money on — i.e., those who pay their balances off in full. The card companies call them “deadbeats.” But deadbeats are far outnumbered by those with rolling balances. Card companies are fine with being outsmarted by the few because they are able to outsmart the many.
5. My liquid cash in accounts at more than one financial institution, all under FDIC limits, give me security. The last emotional response I had with credit cards occurred when Citi Dividends dropped their cash back on gas and groceries from 5% to 2%. Thank goodness my HSBC rewards card still gives 5% on those categories. The day Arco sells gas at more than a 5% discount to gas stations that accept credit cards is the day I start paying cash for gas.
Whether I was totally broke or, like last year, had a pretty good job, I always made sure I paid my credit card in FULL at the end of the month, no matter how painful. I went through the bill of the one credit card I use, and highlighted unnecessary items (like I found out I wasted $50-$100 a month on junk at Walmart), then I stopped buying those unnecessary things.
My husband prefers paying with debit, I prefer credit. Neither one of us carry much cash because it disappears too quickly.
Also, my credit card gives me 5% back on gas and groceries, which is money that comes in handy during the holidays.
I think the problem comes in when people spend hundreds on several different credit cards, don’t pay the full balance, then lose track of how much they owe where.