Are You A Sucker For Using Your Credit Card?

Nationally syndicated personal finance columnist Michelle Singletary thinks you’re a sucker for using your credit cards, even if you pay off your bills in full each month.

Here’s the gist of her argument:

I’m reasonably sure that many people do not make the same purchases when they pay with plastic. This isn’t just a feeling or anecdotal evidence. Researchers have found that people’s willingness to purchase more products or services increases with the use of plastic.

In their groundbreaking research, Drazen Prelec and Duncan Simester of the Sloan School of Management at MIT found that study subjects paid more when instructed to use a credit card rather than cash. In fact, they found people were willing to pay up to 100 percent more with plastic.

Credit cards empower us to spend more on the same junk we would normally buy with cash. According to science, this has many causes:

  • The delayed payment makes us treat credit differently from cash.
  • Charging several items to a card doesn’t help you identify overspending on any single item.
  • Forking out cash provides a strong visual clue that your wallet is getting lighter.

Singletary ultimately argues that credit may be fine, so long as you realize that it may exacerbate spending. She challenges all non-believers to put down their cards for a month and pay only with cash, and then compare their spending to previous months.

What do you think?

Gawker Media polls require Javascript; if you’re viewing this in an RSS reader, click through to view in your Javascript-enabled web browser.

Like it or not, it’s unwise to use credit [Seattle PI]
(Photo: Getty)


Edit Your Comment

  1. LucyInTheSky says:

    wait, this is new?

  2. ConsumptionJunkie says:

    Credit cards cause people to spend more than using cash. In fact, having a store-branded credit card triples the amount people spend at a particular store:


  3. johnva says:

    @ConsumptionJunkie: There is zero evidence of a causal relationship there. People may get store brand cards BECAUSE they shop at a place a lot.

    Likewise, Ms. Singletary doesn’t understand the statistics she’s talking about and overstates her case in order to reinforce her anti-credit bias. She’s an idiot for thinking that things these things apply universally. Statistically, yes, this may be true. But statistics don’t apply to everyone, by definition. She seems to think they do.

    This is similar to how people claim that credit cards make people spend more based on data that shows that credit card purchases tend to be larger than cash purchases. That ignores the fact that many people simply don’t want to carry enough cash around to make larger purchases in cash.

    Again, the problem is not credit cards. The problem is overspending. People need to be disciplined about where they spend money by tracking their purchases carefully.

  4. KassiaIdomeneus says:

    The people who voted for the first option are missing the point. Even if
    you keep track of what you spend with a card, you are still going to
    spend more, whether you keep track of it or not. It’s a psychological
    thing. You see debt increasing, but seeing debt/liabilities increase is
    not the same as seeing cash decrease.

  5. enm4r says:

    @johnva: Again, the problem is not credit cards. The problem is overspending.

    End of story.

  6. zentec says:

    I was going to disagree with this article and then it struck me that after some thought, it’s true.

    My wife and I use our Amex to purchase gas, groceries and just about every other purchase except restaurants (we always pay cash). We budget very carefully, and we always are putting away quite a bit of money each month.

    We never go the store without a grocery list so we’re not splurging there. We’re careful not to get enticed into expensive cheese and crackers at Costco, but the one thing that agrees with the author’s premise is gasoline.

    When we buy gas, we always fill up. And since there’s pretty much plenty of fuel on the weekend, we don’t even think twice about how we drive. Need something for a project? Drive to Lowe’s. Kid needs to go the library? Ok, let’s go. If we saw the cash flying out of the wallet instead of seeing the gasoline bill combined with groceries, I’m sure our driving habits would change.

    Yesterday, I was puzzled at how my wife piled on 26,000 miles on her car over the course of a year. Now I know…we doesn’t see the true cost, there’s always fuel so what’s the problem?

    I guess in my case, the argument is true.

  7. crabbyman6 says:

    @johnva: Those are excellent points.

    Also, in some cases you’re a sucker for NOT using your credit card. I get 2% back on my credit card for paying my utility bills and gasoline purchases. These are expenses I would have with or without a credit card, so at least I’m getting a little back now. The utility companies sure don’t take 2% off my bill for paying cash. Sure, 2% isn’t much, but it certainly adds up and since I pay my bill in full every month I have no interest payments.

  8. TheKingBoar says:

    For me at least, my credit cards cause me to spend less. I pay for everything possible with plastic, and then pay my bills of each month, but I’m not in the same mindset as most people. When I hand over the card in the store, I feel like I’m paying once, and then when I pay my bills at the end of the month, it feels like I’m paying twice. Now I know I’m not really paying twice, but because of that feeling, I found that my spending went way, way down with using credit cards.

    Now it may be because I keep a register of credit card purchases like most people do for their checking accounts, but I think plastic is the best. For me, cash is impulsive. Got a $20? Sure waste it on a coffee. But is a $5 cup of coffee really worth putting on a credit card? Thats another receipt I’d have to save, and another purchase to put in my register, so I find that having a credit card keeps me from making impulse buys more than it causes me to make them.

  9. zentec says:


    Doesn’t=do not. Sorry, it’s the weekend.

  10. FrugalFreak says:

    where is
    E: I do not use credit cards. to do so is approving of credit industry setup, fees, behavior.

    I do NOT approve of where the credit industry has led us in America. They want EVERTHING in transactions to be digital and dividend of those transactions paid to them. By controlling and maintaining credit reporting agencies, they have us under control. all they have to do is push a few buttons on keyboard and many people’s finances could be halted. They can’t control cash.

  11. SOhp101 says:

    She’s right to a certain extent, but for me it hurts as much on the card as it does charging it. Ultimately it all depends on how you handle the receipts and the bill that comes at the end of the month. If you only skim your bill and write the check blindly, then chances are yes you are the type of person that spends more on their card.

  12. amyschiff says:

    For me, putting something on a credit card is MORE painful than other methods because I have the overwhelming feeling that I’m paying with money that isn’t mine. That’s why I voted for #1.

  13. PølάrβǽЯ says:

    I don’t use credit cards simply because I refuse to let my financial life be ruled by three private companies. I have cash, and I can control what I can and cannot buy, instead of the credit bureaus telling me.

    And I save a hell of a lot of money by not paying interest on anything.

  14. johnva says:

    @TheKingBoar: I agree. I definitely think I’m more disciplined spending money on cards than I am with cash. More often than not when I’m carrying cash, I end up being too lazy to properly account for where I spent all of that. When I use a credit card, I can simply download that into Quicken. Then (and this step is crucial), I go back and look at where I spent money during the month. If some category seems like it’s higher than normal or getting out of control then I figure out why and consciously change my habits. But then again other people probably don’t think like me; I’m pretty numbers-oriented in general. I will concede that this article’s premise may be true for some people. I’m just annoyed at the abuse of statistics in order to draw a conclusion the “journalists” have in mind (“credit cards = evil”).

  15. johnva says:

    @aaron8301: Credit bureaus don’t “tell you what you can and cannot buy”. And many people who use credit cards never pay interest in anything. I sure don’t, and I wouldn’t use credit cards if I was.

  16. Whiskey Tango Foxtrot says:

    I try not to use my credit card unless I have enough cash in my bank account to do an immediate transfer when I get home. It gives me greater flexibility with my money, as if the products I purchase do not work, or the services I purchase are not rendered or up to par, I have the ability to apply leverage via a chargeback. You don’t get that if you pay with cash.

  17. pigeonpenelope says:

    i refused even having a debit card for two years–only paying in cash and check. it reduced my spending a lot. when i felt i had control of my account and myself (i had been overdrafting a lot when i was younger due to the convenience of a card), i got a debit card again.

    credit cards do make it easy to overspend also. i keep one with a small limit that i use for online payments. its linked with my credit union so i can easily see my transactions and my spending when i go online to check on my checking and savings accounts.

    its not about the object (the card) its about our spending habits with the card that are bad. when we learn control then the credit card is a good thing.

  18. antisane says:

    This is why I have a debit card (with the lovely “Visa” logo) from my credit union… I CAN NOT spend more than I have. I have no credit cards.

    I know people will complain that debit cards have problems, but I haven’t had any problems yet (going on several years now) with my debit card, and I went nearly bankrupt (via my own stupidity) when I had credit cards.

    My credit union has never given me grief as with chargebacks as some people with debit cards have reported.

  19. forgottenpassword says:

    I generally accept this as true. I use my credit card for everything. And expect to spend a bit more than if I had only used cash. But i figure it is worth it considering the convenience of use & the cashback rewards combiined. But I still keep it under a certain amount (roughly $500 a month).

  20. johnva says:

    @pigeonpenelope: Yes, I agree. It’s all about the spending habits. Can a credit card make a problem with overspending worse? Unquestionably YES. Can a credit card be a useful tool if you are disciplined about your spending? Yes again.

  21. johnva says:

    @forgottenpassword: I don’t accept it as a true at all, for me. The message of this article seems to be that people are just slaves to their credit cards and aren’t capable of spending rationally once they get that power. That may be true of some people, but it’s not true of me. The use of statistics to claim it’s true in general is quite deceptive, because the statistics could be true even if the premise were only true for some people. I would have a lot more respect for the article if Ms. Singletary would not use wording like “without fail” people spend less with cash and would acknowledge the limitations of the conclusions that can be drawn from statistical data.

  22. witeowl says:

    Any casino worker could have told you this a long time ago. Convenience isn’t the only reason they nearly force you to use chips at the tables (and credits at the slot machines). No, there’s also a psychological benefit to the casino. You’re no longer playing with cash; you’re playing with plastic. Who cares about losing a stack of plastics chips with fives written on them?

    As much as I willingly confess that I’m already living a “cashless” lifestyle, I wonder how much wealth I may have gathered had I paid with greenbacks whenever possible.

  23. trk182 says:

    If I take a bunch of alcoholics to a bar they are going to drink more than if I take them to the zoo. This is news?

  24. homerj says:

    I thought this was about Mike Singletary telling me I’m a sucker.

    I’m like “why is an NFL hall of fame linebacker telling me how to use credit cards–and why does he have a financial column”

  25. @KassiaIdomeneus: “Researchers have found that people’s willingness to purchase more products or services increases with the use of plastic.”

    SOME people. Not all of us. As Johnva said:

    @johnva: “But statistics don’t apply to everyone, by definition. She seems to think they do.”

    Exactly. And we have this discussion every time whether credit cards are teh eeeeeevil comes up on Consumerist.

    For me, the psychological moment is when the money leaves my account or mental balance sheet. That means once cash is in my pocket, I just SPEND it, since it’s already off the books and it’s already mentally been “spent” by withdrawing it. A credit card I feel the pain every time I pull it out becuase I’m like, “There’s another $26.50 coming out of my savings.” (Even though that doesn’t happen REALLY until I pay the bill, but MENTALLY that’s how I feel.)

    And I’ve done her experiment on a small scale — some months I get a little cash to keep in my purse for things like lunch out, just for convenience. The months I do that, I spend easily twice as much on impulse food as I do in months where I have to use my credit card for impulse food. It seems like every afternoon, if I have greenbacks, I can think of a reason I just HAVE to walk down to the cafeteria for chips and a soda, or a salad, or a bowl of their excellent ham soup … . If it’s credit card, though, I’ve got to be STARVING before I’ll give in.

  26. johnva says:

    @witeowl: Umm, I would care just as much about losing the chips as I would a stack of fives. I don’t have a magical psychological attachment to paper money that I don’t to other things that are worth just as much.

    Like I said, the fallacy here is overgeneralizing from the data that is actually available. What you and Ms. Singletary are saying may be true for some people, but it’s not true for everyone. I suspect that the distribution of how people use credit cards is very skewed into several groups.

  27. HaloZero says:

    The only reasons I use a credit card is because
    1) Its safer than carrying cash around
    2) It’s a pain in the ass to get change and put it back in my wallet.
    3) All my expenses are kept track of easily and I can quickly find out what I spent on what day and where (I put all cash expenses into my PDA)

    Iono, keeping track of everything electronically seems to be easier for me.

  28. johnva says:

    I was thinking about this, and maybe it’s an old vs. young thing. Older people might actually have the “magical psychological attachment to paper money” I was referring to, simply because it’s what they used most often when they were young. So for those people, maybe it’s true that using plastic doesn’t feel like spending “real money”. For me, I never used cash heavily in my life. I started out with a debit card and then changed over to credit cards for everything. So I’m wondering if that could explain a lot of this difference of opinion. A lot of the non-Internet media is very biased towards Baby Boomer perspectives, so maybe that explains Ms. Singletary too.

  29. aurf says:

    BS. I treat my credit card as an extension of my bank account. I spend X and subtract X from my budget. I pay it off way before its due and I get free (yes free, I’ve been unable to find the catch, except for if I were to let a balance build up and I had to pay interest) Amazon money when I use the card.

    I never use cash because it is unsafe. If I lose cash or get it stolen I’m screwed. If I lose my card I cancel it and I’m good to go. A small inconvenience.

  30. aishel says:

    We enjoy using a credit card because that means more points, which means more rewards. If I have a choice of buying something with either check or credit card, I always choose CC. With big ticket items, such as my car insurance, this means many more CC rewards.

  31. @HaloZero: “All my expenses are kept track of easily”

    Yes, I also find that when I do credit-only spending, seeing that bill at the end of the month with EVERYTHING AT ONCE on it makes me very aware of what I’m spending all month long. With cash it just keeps flowing out the door and there’s never a big accounting that goes, “Dude, you just spend $900 this month.” With cash it’s just $60 here, $20 there, nothing that’s all, “Look at how much you spent on groceries!”

    I can do this, obviously, with my budgeting program, but the psychological impact of the credit card statement is just different for me, and keeps my spending under a much tighter rein.

    I switch to all-cc spending when I got married, very reluctantly, at my husband’s insistence. I was SHOCKED how much less money I spend when I was all-cc instead of all-cash.

    But I would never advocate such a thing for everyone, because obviously everyone’s psychology of spending is different, and for some people it’s the credit card that’s the magic free money that doesn’t count. For me, it’s just that the cash in my pocket is already spent in my mind, so it doesn’t matter how much of it I spend. I think really the key is figuring out your relationship with your money and then building your money management system around ways to psych yourself out.

  32. eblack says:

    It’s not like there are a lot of alternatives. If you don’t use credit cards you don’t have a credit score.

    Mine pay all of my automated charges every month, so it’s a fairly fixed amount. I just pay it off at the end of the month.

  33. johnva says:

    @Eyebrows McGee: Yep, I totally agree with you that spending psychology is very different for different people. For me, money is just an abstract number in my account, not a tangible thing (maybe because I’ve never used cash much). For other people, maybe it doesn’t seem real unless it’s a physical object. The unspoken premise of articles and research like this seems to be that everyone has the same psychology about money and personal finance. I don’t think that’s true at all.

  34. racermd says:

    @zentec: There’s probably a little more to it than the author lets on. There’s actually two major forces at work that ‘prove’ the result.

    First, and probably most relevant, is that credit cards are a layer of mental separation between you and your money. A parallel example is how casinos won’t allow you to gamble with cash directly – only chips (there are other reasons for this in a casino, but it’s one of the selling points). When you deal with your money in an abstract manner, you lose a little mental control.

    Second, it’s FAR more convenient to pay with a credit card than to pay with cash. There’s no counting, no waiting for change, not worrying about whether or not you’re carrying enough for a given errand, etc. You have a whole wad of ‘money’ available to you in an instant – no waiting.

    Personally, I go cash-less most of the time simply because it’s convenient. Getting cash from an ATM or at the bank is an extra trip I generally don’t need to make since most places take my credit or debit cards. It’s also worth noting that I carry a pair of $20 bills in the deep crevices of my wallet for emergencies – out of sight when I open it so I don’t get the urge to use them. Also, my wife and I are reducing some bad debt we got into a year or so ago. We’re doing remarkably well without having to resort to cash-only spending.

  35. Juggernaut says:

    @johnva: “But statistics don’t apply to everyone, by definition. She seems to think they do.”

    Soooo, you should’nt walk the batter with men on second and third with 2 out? C’mon…

  36. thelushie says:

    @johnva: The only way you can get a causal relationship is by doing a true experiment which in any applied field (such as consumer psychology) is virtually impossible. In qualitative, quasi-experimental and the like, you look for correlations because there really isn’t a way to control for every confounding variable out there. And my guess, is that the MIT study talks about this but the blog didn’t. There is a correlation between spending more and using plastic. Just because this doesn’t apply to you or to 100 or 1000 people doesn’t mean there isn’t a valid correlation. This isn’t a review of an article, so it has been simplified because most people, including you, don’t know what alot of it means. My concern would be if the researchers themselves misrepresented the data. That is where the problem would lie. Not in some blogger talking about some research that she probably read about second hand on a site like BoingBoing or Digg. *sigh*

  37. dangermike says:

    I call BS. Perhaps I’m unusual, but I cannot recall a situation ever in my life in which I’ve spent more because I had the credit capacity of a card in my pocket. Then again, I can think of only one time in my life that I’ve carried more than a zero balance at the end of a month (it was during a move and completely oversight on my part).

    Given that, and the fact that my credit card of choice is my costco american express with cash-back bonuses on purchases, they actually pay me $150-250 to use their card each year.

    In fact, I rarely have more than $25-30 in my pocket. It keeps my wallet slim (a fat wallet looks dumpy and can cause back problems from sitting on it all day) and contrary to the article, I don’t put much thought into spending it. It usually goes faster than the same amount my card.

  38. spinachdip says:

    I’d love to see everyone who chose “I can control my spending!!!” to participate in the Stanford Prison Experiment (or a behavior experiment like that, but not as notorious). If people had as much control over their behavior and understood their catalysts as well as they think, psychology wouldn’t exist.

  39. Juggernaut says:

    @thelushie: So, I should walk that guy!

  40. dangermike says:

    and I forgot to say before:

    I got the car about 6 weeks after I got my bachelor’s degree (which was about a month into my first “real” job) and in the subsequent 3 years since then, between the constantly paid of cards and a 2-year-old car loan with almost a whole extra year’s worth of equity chipped off, my FICO is somewhere in the 780’s and continually rising. This might just be the year I buy a house.

  41. spinachdip says:

    @dangermike: “but I cannot recall a situation ever in my life in which I’ve spent more because I had the credit capacity of a card in my pocket.”

    Nobody is suggesting that people go to a consciously think, “Well, since I have a credit card, I will buy more crap I don’t need!”

    And with the cash-back deal with Costco AmEx, you may actually be buying more than otherwise (of course, there’s no real way to know since there’s no way to create a control sample for your particular case).

  42. azntg says:

    I’m in the same camp as the pro-credit card group. My personal experience is that I actually spend less when I use my credit cards on impulse purchases than when I do the same with cash.

    See, when I pay by card, I keep all my receipts and maintain a meticulous record on a database (and double check them against the monthly statement). The sum total is aggregated on demand and then it’s… ouch! I spent $300-something this month? Okay, better try to cut it back to $250 next month. And so on.

    As of cash, sure I notice my green pieces of paper and the god heavy sack of coins physically disappearing as I spend it. But I personally have a harder time keeping track of how much I spent at the end of the day. Sure, I could meticulously record like I do for credit card purchases, but I find it much more cumbersome and difficult to do so with cash purchases.

    Also, I don’t feel compelled to stick to a stricter budget when I pay by cash, as my mind has an “Okay, I can spend as much as I’m carrying with me” mentality while when I use a credit card, it’s more like: “Oh crap! $15 more and I’ll hit my monthly budget limit.”

    I do know several people however, that would benefit more from cash-only spending. I just feel like I’m not one of them.

    Long story short, I think Michelle Singletary is a sucker for making such a broad assertion that covers everybody on a subject that may or may not apply to everybody! Credit cards have their uses.

  43. SnickerDoodle says:

    I use my credit cards to my advantage, big ticket items and only what I want. The advantage, the extended warranty. and if i schedule my payments right. I get to collect some interest too!

  44. sdf632 says:

    Shouldn’t we think about the flipside of this as well? Assuming you did spend less using only cash, as an economist I would have to point out that you WILL be experiencing less utility. There’s always the tradeoff there and ultimately, most Americans choose to satisfy shorter term wants and needs over long term. This would merely shift short term to long term and leave you feeling poor.

    Besides, I’ve tried it both ways and found it to be not the case. And I would rather pay less on mortgages and various debt instruments that I need later than pay more because I decided to opt for cash/not build credit.

  45. johnva says:

    @thelushie: I never said the correlation didn’t exist. I was saying that there are many potential explanations for that beyond just “credit cards make you spend more”. My problem is not with the study that collected the data, but with the speculative conclusions being drawn by the reporter. Ms. Singletary titled her post at the WaPo on this “Credit Cards Cost, No Matter What”. She clearly doesn’t understand what she’s talking about making a statement like that (or doesn’t care). Reporters misrepresenting or misconstruing the results of a study is a huge problem. I’m still not sure if this is because reporters tend to be dishonest or if it’s because they are poorly educated. Either way, I’d prefer they not report on science (and quasi-science) if they can’t get it right.

  46. planetdaddy says:

    It took time but I don’t abuse my credit cards.

  47. SonicMan says:

    Why is this on the consumerist. Rememer one of the consumers best weapons. The ChargeBack. You can’t do that with cash.

  48. bilge says:

    I didn’t learn to control my spending until I stopped using cash and put everything on my credit card. When I use cash, I don’t keep track of where I’m spending it and when I run out, it’s just a quick hop to the ATM for a little bit more. Another way using credit has helped me control my spending is that when I see a sign by the register that there’s a minimum purchase of whatever amount, I usually walk out.

    Added bonus is that I now have enough frequent flier miles to spend a few days in St. Maarten.

  49. SonicMan says:

    I can not even remember the last time I made a big purchase with Cash. If anything I am going to but is over $100, Im going to use credit. There is no protection with cash.

  50. parad0x360 says:

    I got myself into alot of debt with credit cards from the very moment I hit 18. It took until I was 24 to digg myself out of all that debt and i killed my credit doing so. Now im on the long road to recovery. I have been credit free for a year and its almost time to start rebuilding.

    If you can avoid using credit by all means do. Its not worth the trouble it can cause.

  51. chrylis says:

    @johnva: Although I don’t always agree with Michelle’s advice, I regularly listen to her NPR piece, and I’d say that calling her an idiot is uncalled for. Her target audience isn’t primarily people who are as personal-finance-savvy as the typical Consumerist reader, and the generalizations she makes (in this column and elsewhere) are not claimed to be universals.

    I do think that there’s a generational difference in how people deal with cash and credit; I know that for me personally (24 years old), I don’t experience a difference between spending the two. Not sure whether this comes from the bookkeeping system my mom taught me (former bank manager) or from the overall virtualization of money.

    One interesting aspect, though, that doesn’t get brought up much is “credit-card inflation”: Rewards programs, especially the cash-back maximizers that Consumerists tend to employ, are essentially a tragedy-of-the-commons scenario: the money for them has to come from somewhere, and it’ll be priced into everything that we buy. I try to stay ahead of it by optimizing as much as I can, but it’s a circular phenomenon.

  52. amoeba says:

    @aaron8301: I do exactly the same and I was going to say the same. Besides, the only credit card I have is somewhere in a folder.

  53. Nick says:


    I believe there have been actual experiments that have demonstrated that people will pay/spend more when using abstract representations of money (cards, etc) as opposed to hard unit-based representations (coins, bills). If you’ve been to a casino over the past decade, you would see that they are capitalizing on this principle by slowly getting rid of coin and chip based gaming in favor of card-based “credits.”

    Of course, this does not mean that everyone will spend more with a credit card, but I think it is safe to say that the average person will do so. You should also note that the vast majority of people don’t believe that they behave like the “average person,” yet they more than likely do. I would bet that almost every consumerist reader would spend less if they used only bills & coins to pay for things. For some, the difference would be negligible, while for others, the difference would be huge.

    But, that being said, I use credit cards for almost everything. I write on average about one check per year, and I almost never use cash. I’m of the camp that feels that there are more important things than money, and, as long as you are spending within your means, what’s a few frivolous purchases here and there?

  54. johnva says:

    @chrylis: I disagree about Singletary. This is at least the 4th or 5th time I’ve seen or heard her give what I considered egregiously bad advice or draw bad conclusions from something she’s read. I’m not applying those words lightly. I just don’t think she’s particularly well-qualified to be giving out financial advice. And I do think she’s explicitly claiming it’s universal in this column and in her original column on the same subject in the Washington Post. She says people who disagree are just “confused”, when the real problem is that she doesn’t understand the data she’s relaying. Like I said, I wouldn’t have a problem with what she’s saying if she would just not draw these improper and unfounded conclusions from it.

    Also, for kicks, I just found the scholarly articles she’s referring to. Having read them, I don’t believe either provides particularly strong evidence for the conclusions Michelle says they do. The study used only about 30-40 participants, all of whom were MBA students, for their experiments into credit card behavior. And they used a contrived situation rather than (for example) comparing their behavior with cash vs. credit cards for an extended period of time. And apparently there are a number of other researchers who strongly disagree. So I’m going to go out on a limb and say that Michelle is cherry-picking studies that support her preexisting bias. And like I said, none of the studies support the idea that EVERYONE spends more with credit cards than cash (the conclusion Michelle is drawing).

    You’re right about the credit card inflation. But I can’t change the system, so I’m going to take advantage of it. I personally lose more if I don’t take advantage of credit card rewards. The people who pay cash only ARE subsidizing me in the form of higher prices. I’m going to do what benefits me personally the most here. It’s not that big of a problem as long as there is an upper limit to how high the credit card rewards go (and, generally, they don’t average much higher than 3-5%).

  55. TheKingBoar says:

    @parad0x360: But for people who are smart about credit and know what they are doing, it’s incredibly powerful. I’m only 20, and I have a near perfect credit score because I’ve only used credit cards since I was 18. The only reason it isn’t perfect is because I’m too young to have the history that they want.

    @Juggernaut: That is a retarded example. You can’t compare consumer spending statistics to a strategic sporting game. Of course they’re not going to walk the batter. It’s not statistics, its strategy.

  56. witeowl says:

    @johnva: Well, sure, that’s the reality for every statistic. Will smoking and drinking end your life early? Ask George Burns. But, now… how many of us are George Burns?

  57. johnva says:

    The problem with what you’re saying (and with what Michelle is saying) is that there is huge variation in how different people use credit cards. There are at least two very different groups of people we can look at right away (convenience users vs. people who carry balances). So using an “average” of all those people to make a point is very misleading, because they are really two completely different distributions of people.

    And personally? I KNOW that I behave differently from the “average”. The “average” person has thousands of dollars of credit card debt (another very misleading use of the average statistic). I don’t, and never have.

  58. madanthony says:

    I think I’m actually less responsible with cash than I am with credit cards. I use credit cards for almost all of my purchases – for the convenience and the rewards. I only use cash for transactions with places that don’t accept credit.

    Because of that, I tend to base my spending and savings on what the balance in my checking and savings accounts are and what the balance on my credit cards are, and I can easily monitor and track those things online. On the other hand, I

  59. madanthony says:

    (continued, sorry, accidentally hit the enter key) tend to have no idea what happens to cash once it leaves the ATM – I have no idea how much is in my wallet or on hand, or what I spent it on.

    I sell at flea markets occasionally, and also buy stuff at flea markets and yard sales, so it’s not unusual for me to have several hundred bucks lying around the house – and I often have no idea, because it doesn’t get included in my online cash or debt tracking.

  60. TheKingBoar says:

    This story is making me think of the old axiom – “Statistics don’t lie, but liars use statistics”. It all depends on the user. If you actually have personal responsibility, they’re great. If you don’t, well hopefully you’ll learn from your mistakes.

  61. spinachdip says:

    @TheKingBoar: No, the credit card-baseball analogy works well. While I have an issue with the reporter’s assertion that CCs are bad for everyone, it is arguable that more often than not, even people who think they’re responsible CC users might be spending more than they would with cash. But every study has outliers, and in this case, Consumerist is full of outliers when it comes to spending, so “I’m a good credit card user! This article/study is BS!” is, well, BS. The thing is, as unique and free-will-having as we’d like to think we are, human behavior is pretty predictable, so these studies do tend to reflect the world at large.

    Similarly, while you don’t want to intentionally walk a batter with two outs, you have first base open and the batter is someone with a ridiculously high OPS like Barry Bonds, walking might not be such a bad idea. But he is an outlier, and one example (or even 100) doesn’t invalidate a study.

  62. witeowl says:

    Also: For those of you who who are stomping your feet, sure that this doesn’t apply to you without ever having run an experiment similar to Singletary’s suggestion, I have a parable in four lines of dialogue:

    “Damn, you win again. How could you tell I was bluffing?”
    “It’s easy; you have a subconscious tell.”
    “No, I don’t. I’d know if I did!”
    “Um, right. My mistake. Your deal, I believe”

  63. spinachdip says:

    @johnva: I think your use of “average” is different from schwnj’s and you’re getting caught up in semantics. You mean “average” as in the mathematical term, like the mean. Shcwnj meant “average” user, as in “typical”.

  64. TheKingBoar says:

    @spinachdip: But that’s exactly the point. Even here on Consumerist, just because everyone is saying that credit cards are good doesn’t mean you can apply that statistic to everyone. I already said that though, people without personal responsibility shouldn’t have them. This is a very clear case of how statistics don’t apply to everyone, a clear contrast to a baseball strategy. Perhaps I understood the Juggernaut wrong, as it appears that he (or she, it is the internet after all) was trying to show how statistics do apply to everyone. They clearly don’t.

  65. johnva says:

    @spinachdip: All I’m asking is that people who make assertions like this article does qualify their statements instead of giving such general advice. Reporters, in general, are much more guilty of not qualifying their statements than scientists and economists are, in general. I normally would agree that a lot of human behavior is pretty predictable, statistically. For example, I’ve read that voting behavior for a particular county or state is fairly predictable just from demographic information. In this case, however, I do think that this is an abuse of statistics. We already know that there are large differences in the way different people use credit cards, and that it’s probably not a single normal distribution. So I think it’s very misleading to spout off about some mythical “average person” that doesn’t really exist here. I think this article would make a lot more sense if it broke down this behavior in different subgroups of credit card users, and looked at people’s ACTUAL, real-world credit card use over time. Most of the studies on this (as I discovered following the references from the articles she mentioned) are crippled because they don’t have access to that sort of data on individual users. So instead they either use a small-scale contrived experiment or they look at data from only one source (one of them looked at amounts of cash vs. credit donations to the United Way). In other words, I think it’s very difficult to get good data on this phenomenon. But that doesn’t stop personal finance writers from confidently reporting the results as if they were universally true, especially if the results appear to confirm something the columnist already “knew” was true.

  66. spinachdip says:

    @TheKingBoar: But they do apply most of the time, and putting the “everyone” thing aside since that’s clearly wrong, the outliers don’t invalidate the basic argument. Likewise, Barry Bonds doesn’t invalidate the “don’t walk with two outs” tactic.

    Now, I think you’re missing the point of the article – even people who think they practice responsible spending are losing out.

  67. katzeroo says:

    Who can tell if this is true. Perhaps generally it is, but there are many responsible people, myself included, that only use the card for things that are fixed each month. Utilities, groceries etc. I may get a $5 impulse buy in the supermarket, but I’m certainly not getting a filet mignon instead of my usual chicken. If you budget correctly and you purchase what you need, not only doesnt it make a difference, but you will save in the end when you can use the airline miles you got for a free ticket instead of spending the sky-high prices it cost not to travel. There are benefits to using cards if used responsibly. There are trends, but like anything, they vary from person to person.

  68. johnva says:

    @witeowl: Her suggested “experiment” is laughable, because it’s not particularly well controlled. For example, if people did try cash-only for a month, their spending might go down temporarily just because they’re consciously thinking about their spending habits due to the change.

    @spinachdip: It’s not my fault if people use the term “average” incorrectly to mean “typical”. That may be a colloquially correct use of the word, but it’s based on widespread misunderstanding of what it means. And I don’t believe there is such a thing as a “typical” credit card user. I believe there probably are typical users within different smaller categories.

  69. wring says:

    but i can’t use chargeback with cash.

  70. johnva says:

    @spinachdip: No, only people who THINK they are spending responsibly without actually measuring that are potentially losing out. I KNOW I am spending within my budget, because I carefully track my purchases.

  71. TheKingBoar says:

    @spinachdip: How am I loosing out? I spend within my budget, pay no interest, get cash back, extended warranties, theft protection, and buyer protection. The only thing I’m missing out on is impulse fast food purchases, which no one needs anyways. There’s really no way to miss out on the point of the article because it’s inherently wrong. And as a rule of thumb as a Seattle resident, it’s impossible to trust anything that the PI publishes.

  72. I say people who only use cash are bigget suckers, for giving up cash back and the other perks like extending the warranty a few more years for free.

    I know exactly how much I spend on a card and it will be the same if I used cash. I would say most people who pay in full at the end of the month know what they are doing.

    The only time I spent more then I initially budgeted was with a computer purchase, I was able to get a better computer with no payments or interest for a year so was a better deal for me.

  73. Dakine says:

    Credit cards are fucking evil. End of statement.

  74. Dakine says:

    Some of you desperately need to watch, “The Corporation”, “In Debt We Trust”, “The End of Suburbia”, & “Maxed Out”.

    Stop being fucking sheep.

  75. johnva says:

    @Dakine: Credit cards can only screw you if you choose to use them irresponsibly.

  76. Nick says:

    @johnva: I understand your argument, but I think I am confused as to whether you disagree with the premise of this writer’s advice, or with the evidence on which she bases it.

    So let me ask you the basic question on a theoretical, causally ideal level: Imagine two parallel universes–one in which Person X spends a month using a credit card for his purchases, and the other in which his credit card went missing, and he was forced to live that month on cash. Let’s also imagine that Person X has a good amount of money in the bank, so that he needn’t worry about covering his spending for the month. Basically, the only difference should be whether Person X pays with a credit card, or whether he pays with cash. (I’m sure you could come up with other differences, but humor me and assume everything else is equal.)

    My question to you is: how does Person X’s spending differ between the universes (credit card vs cash)? Does it differ? And if so, in what direction?

    Personally, I have no doubt that Person X would spend less when using cash. However, as you mention, in the real world, everyone is different, and so they probably don’t behave exactly like Person X–for many people, it wouldn’t make a difference if they used cash or cards. But I can’t envision that many people would actually spend MORE if they used cash instead of cards.

  77. Dakine says:


    “but i can’t use chargeback with cash.”

    You don’t need “chargeback”. You can’t get fucked with cash. Cash is up close and personal. If you’re stupid enough to make a cash purchase to someone clearly sub-human and ripping you off, go back and break his kneecaps. If you buy from some big ass box store (which you shouldn’t do anyway) and need to return something, hey, it’s a cash transaction baby….. here’s my receipt, gimme cash back.

    The so-called “benefits” do NOT outweigh the punishments.

    Burn those cards.

  78. johnva says:

    @schwnj: I disagree mainly with the writers’ argument, not the underlying study. The study doesn’t support her conclusions. However, it’s also not a very convincing study to me because it doesn’t actually study real-world behavior and because it uses a very small and biased sample of people. The reason is that actually obtaining good data on something like this is HARD, because we can’t do the experiment you described and because of privacy, etc concerns.

    I think plenty of people might spend more with cash than cards. Like I said, for me, tracking my spending accurately is very important in keeping my spending under control. Using cash makes this much harder and more inconvenient for me because I have to manually track how much I have left at any given time. With credit cards I receive information on my credit balance, etc online and using my mobile phone.

    @Dakine: You can most certainly “get fucked with cash”. Once they have your cash, they have leverage over you. With a chargeback, you have leverage over them. Things aren’t as black and white as you imagine.

  79. Dakine says:


    Not true. PLENTY of people have been burned with “the best intentions”.

    It happens every single day.

    It’s happened to me. I run high end balances. Have for decades. And single card of mine will run typically, $20k – $30k any given month.

    I am a valued cash cow consumer. (in their eyes)

    But they post that check 1 DAY LATE, you’re at 32.99%……. forever. That’s TWICE as bad as MAFIA LOAN SHARKS. How is this legal?

    Because we love George W. And we allowed him to fuck us proper.

    I know….. I’m just another crazy fucker that’s talking nonsense.

    only problem is…. it’s true. Call Bank of America and ask what your current interest rate is…. they will CLOSE YOUR ACCOUNT FOR ASKING. This was a story i read here and didn’t believe…. so I tested it with my B of A accounts of over ten years…. they are now closed, and “pending third party collection”…..

    so no….. just because YOU THINK you’re “responsible” means jack.

    These companies don’t care about you…. your family….. your job…. your life….. your situation….. your “contribution to society”….. or anything…… they only care about ONE thing: How much can we squeeze from Person A and for how long?


    All that crap about “Identity protection”, and whatever else…. it’s all bullshit. NOBODY FUCKNG CARES.

    Wake up dude…. before it’s too late.

  80. spinachdip says:

    @johnva: This might shock you, but some words have multiple definitions.

    1. Mathematics. Of, relating to, or constituting an average.
    2. Being intermediate between extremes, as on a scale: a player of average ability.
    3. Usual or ordinary in kind or character: a poll of average people; average eyesight.
    4. Assessed in accordance with the law of averages.

    @johnva: And how would you KNOW without a control sample?

  81. Dakine says:


    It is VERY black and white.

    If you believe the credit companies are in business to “help” you…. or are, “looking out for your best interests”… “we’ll protect you because we value you”….

    you are in for a big wake up call.

  82. spinachdip says:

    @TheKingBoar: I wasn’t talking about you.

    I’ve made it pretty clear that people who post here are likely to be outliers, or at least skew the data since they’re more knowledgeable and conscious about the workings of the systems.

  83. Dakine says:

    I called one credit card company, to remain unnamed here to prevent any bias (WaMu)….. and said, I’d like to know about your “Debt Reduction/ re-payment program”…. that ALL of them have.

    It is corporate POLICY, they will not help you until you are 90 days past due. Even if you call them BEFORE you’re past due.

    Why? THis seems insane. You’re doing “the right thing”….. as a consumer that WANTS to pay your debt…. yes? The “right” thing.

    They don’t care.

    In that 90 days, they can tack on interest, late fees, over-the-limit-fees, finance charges, etc….. THEN start calling you to make good on it.

    But….. wait….. I called, BEFORE i was late….. explained my future situation…… you knew it was coming….. and nobody would give you the time of day. So NOW it’s a problem?

    There’s your “being responsible with credit” for you.

    And by the way…. I tried this with American Express, WaMu, Bank of America, & Chase…. figured that was a good cross-section of corporate policy.

    The ONLY one willing to do anything was Chase.

    The rest told me “too bad”.

  84. johnva says:

    @spinachdip: I’m aware that it is used by many people to mean “typical”. People who mean that should just say “typical”, because they confuse the issue by using the word “average”. And the whole reason average came to mean “typical” is because of people not really understanding what it means.

    I defined “responsible” as spending within my budget. I KNOW I do that, because I measure it. My spending is not driven by impulses, and definitely not driven by what form of payment I use. I know this, because I adjust my spending habits when I’m spending too much in one area.

    @Dakine: Well, I always have at least 10x more in a savings account than I put on my credit card at one time, so I don’t think I’m in much danger of not being able to pay off my card even if I lost my job, etc. Yes, the credit card companies can be sleazy. But they haven’t been to me.

  85. TheKingBoar says:

    @Dakine: How’s that coolaid? Seriously dude, credit card companies are not out to get you. They can’t survive without you because no one would pay them otherwise. And I can see how someone who carries FOURTY THOUSAND DOLLARS in debt on a single card would attract that kind of attention for missing a payment. It’s hypocritical to tell other people how they’re buying everything the companies say when you’re buying everything their detractors say. I know the credit card companies could up and close my accounts at any day. What am I going to do? Switch to cash. No big deal. I’d miss the convince, but they are not teh evils like you think they are. People who go around spouting lines like “you are in for a big wake up call” are pathetic, just trying to scare people into living another way because you don’t agree with them.

    You’re an idiot too. How is W responsible for credit cards? He didn’t make you sign up for them. It’s simply a corporation running in the country, like they are allowed to do by the Constitution. If you don’t like they way they do business, don’t do it with them. But seriously get a life, and stop listening to all the conspiracy theories. George Bush is not to blame for your mistakes, you are.

  86. hmk says:

    @Eyebrows McGee:
    I totally agree. I find it too irritating to track cash in my budget, because with the change and all, I mess up every time. So once cash is withdrawn (usually at the grocery store, with no ATM fee), it gets frittered away and I tend to spend it faster.

    I will concede that sometimes I will spend more with my store-branded card at that store. But I don’t go there that often and try to buy only what I would have anyway. I get points from them and they recently sent me a $50 gift card, which was spent on something I was planning to purchase anyway.

  87. dangermike says:

    @ spinachdip: I am specifically saying that to the best of my ability to discern, I am more likely to spend cash that’s in my pocket than I am buy something on credit. It’s a quirk in my own personality and largely WHY I disagree with article (and worth noting that this is the reason I prefaced my previous statement with an admission that I’m likely out of the norm).

    But anyway, you’re wrong. I don’t weigh the cash-back thing into my decision to purchase anything. It’s simply a nice bonus that provides me with a reason to use the costco card which is about 2 years younger than my mastercard which has a much lower interest rate and much higher limit. Nor do I believe that I’ve put any more purchases on it than I would have with cash. If the study is to be believe, sure on average, people may behave as you’re saying you believe I behave. But I’ll openly tell you when you’re talking averages, especially in behavioral studies, trends are loose, and if you want to try to presume my habits based on those trends, particularly when I’ve explicitly said my own experience contradicts their findings, well I’ll sell you a piece of a bridge that most people believe is in london.

  88. hmk says:

    @hmk: I should add that I do not carry a balance on the card. At all. CC transactions are put into the budget just like debit card/checks are.

  89. johnva says:

    @Dakine: What do you mean by “Debt reduction/debt repayment”? Are you wanting them to write down some principle for you or something? If so, I can understand why they wouldn’t do that until you’re late. They obviously don’t want to reduce how much you have to pay them unless they think they’re getting nothing otherwise. Otherwise, why would you need a “repayment plan”? You can do that on your own.

  90. madanthony says:


    Well, I guess technically I would spend less if I didn’t have credit cards, if only because I wouldn’t be able to easily buy stuff online. But given that I get a lot of good deals by buying online, plus I can easily buy items (like used books off that I can’t easily find locally, I think I’m still better off with the cards.

  91. Dakine says:


    please watch “The Corporation”…. if nothing else.

    If you’re so inclined, please educate yourself on corporate law.

    There is NOTHING in the “Constitution” about corporations, favorable or unfavorable.

    You are one of those clueless sheep I’m talking about. Corporations are not here to fucking help you dude.

  92. Dakine says:


    It’s a matter of principle.

    If you call them, ask for your current interest rate, they will close your accounts, because now you are a risk.

    If you ask for a “debt repayment program”, they will close your account, because now you are a risk.

    And as a “good consumer”, right? Everyone tells you, if you know you’re going to be late, call them! They will “work with you”….. NOT true.

    They don’t care. So, according to corporate policy, I MUST refuse to pay for 3 months before they will offer me anything in the way of repaying what I owe. When I’m calling them in advance and ASKING them to take my money on a plan that works for both of us.

    And yes…. I made it very clear…. if you can’t offer me some sort of program that I can pay you and still eat….. if my “minimum payment” is your only program…. that I cannot pay…. then you get NOTHING. Because sending anything less than the minimum is pointless….. if I say, “I can send you $200 bucks”…. but my minimum is $900….. it makes no difference. I still get the late fees, the finance charges, all of it…. it’s just $200 bucks out of MY pocket, for NOTHING.

    And yet…. they offer nothing.

  93. johnva says:

    @Dakine: Well, no one forced you to go so deeply into credit card debt. How did that happen? If you hadn’t done that, you wouldn’t have had whatever you spent that money on. I’m sorry, you need to have a pretty high balance to have a $900 minimum payment. What you’re asking them to do is to rewrite the terms of your contract with them so it’s more favorable to you. They have no reason to do that unless they think they’re getting nothing otherwise.

    I understand that circumstances can screw people. I have trouble seeing what circumstances would compel someone to go $20-30K into credit card debt.

  94. Pink Puppet says:

    @Dakine: Unfortunately, raving in a paranoid manner and swearing has never been the best way to get people to give your comments any sort of merit here on the Consumerist. I would recommend not losing your temper if you want anyone to pay you any mind.

  95. Amy Alkon000 says:

    My credit card neither causes me to spend more nor less. I have the ability to reason, and use a credit card simply as a form of payment. It’s convenient, I pay the bill in full every month, and get airline miles when I do.

    Think of a credit card like heroin. I live kind of near the ‘hood, which means I could get smack pretty easily whenever I want it. I don’t take it, though, because I hear it’s rather addictive, and becoming a junkie doesn’t mesh well with my rather insane writing deadlines. The same goes for limiting my wine consumption

    Self-control, whatta concept.

  96. Amy Alkon000 says:

    Sorry, limiting my wine consumption to a glass or two with dinner, when I go out, instead of drinking a bottle or two.

  97. azntg says:

    @Dakine: Dakine, I can agree with you that some of the tactics that the credit card companies use are unethical and outright horrible.

    However, to make an analogy, you really sound more like a person cursing out fire after you carelessly burned yourself with one.

  98. anyone have a link to the study? I want to know the sample size and other factors used.

  99. Jesse in Japan says:

    I am very happy to be living in a cash-based society where many venues will not even accept credit cards (though that aspect is changing).

  100. Dakine says:

    Hey, my situation is what it is…. I’m not asking for sympathy from anyone.

    I’m simply saying, don’t walk around in your every day lives thinking that “Capital One”, or “American Express” is looking out for you. Because they are not.

    I apologize if the profane language offends you. Maybe you need thicker skin. They’re just words…. and TYPED words at that…..

    the bigger picture here is, the people posting and thinking that Bank of America is somehow your “friend”, is ridiculous.

    and the sooner you KNOW that, the better. It doesn’t matter what your version of a “good consumer” is….. they don’t care.

    If it can happen to me……. you’re next.

  101. cyberscribe says:

    With all the extra expense and hassle associated with credit cards, I honestly don’t understand why anybody would ever want to use them.

    Credit card companies seem to just love playing endless games with YOUR money, and then charging you heavily for the “privilege”.

    Cash is the only way to go. Refuse to become a financial slave to the plastic vendors.

  102. johnva says:

    @cyberscribe: What extra expense and hassle?

  103. @johnva: “I’m still not sure if this is because reporters tend to be dishonest or if it’s because they are poorly educated. Either way, I’d prefer they not report on science (and quasi-science) if they can’t get it right.”

    having once been a science reporter:
    1) Scientists are not typically the best communicators. One guy handed me a 500-page set of equations and graphs I would have needed at least a masters’ to read. I have college calculus. He was genuinely puzzled as to why I requested further explanation. (Side point: Sciencey places need to hire someone who speaks liberal arts to do their PR. That’s a gift.)

    2) Stories have to be readable by the general public, which means sometimes you’re presenting metaphors or simplifications to explain the general concept.

    3) Editors then attack them, sometimes abusing your metaphors and explanations beyond all belief.

    Even when you take the fully-edited article back to the scientist and they say, “Wow, you did a really good job explaining this!” frequently the public reads it and is like, “Oh, teh noes, radiation is going to kill us all from the new X-ray machine!”

    @schwnj: “But I can’t envision that many people would actually spend MORE if they used cash instead of cards.”:

    But I HAVE run a personal experiment similar to her study, and I can run it any month I want, and I ALWAYS spend more with cash than with credit cards. Cash is “spent” as soon as I have it because it’s not in the account. Pulling out the credit card physically pains me. The credit card is an ongoing accounting; cash I feel like I have it, so I might as well spend it. If I go to the grocery store with a credit card, I spend $62.73. If I go with $80 in cash, I think, “I could buy $17 more … mmmm, ice cream!”

    Cash is actually EASIER to use at my workplace than CCs are, so some months I get cash, and I TOTALLY spend more any month I have cash in my purse than when I have just the card. (And not just at work, where it’s more convenient to use cash — everywhere I can use cash!)

  104. @Eyebrows McGee: I should add — I do not therefore thing EVERYONE should use credit cards. CLEARLY for many people, the credit card is the magic free money that never runs out. But from 30 years experience, I know that I have a hard time writing checks and using plastic, but if I have cash in my pocket, I spend it ASAP. That’s just my money psychology. “I can buy this $80 sweater!” when I have cash is like, “woot, sweater” but when I have plastic it’s like “And then have to pay the bill later, ugh, I don’t want to do that.”

    People should introspect, experiment within reason, and discover what their money psychology is, then work with ways to psych themselves out with that.

    If I take cash to the bar (my favorite bar is cash only), I totally drink more than if I take a credit card. I’m like, “Hey, I have $15, I can keep drinking to $15!” With the CC, I go, “Man, $2 is expensive for beer, I’m quitting after two.” But what I AM more likely to spend more money on is when I go out to lunch with a friend, I’m much more likely to pick up the tab if I have my credit card than if I have cash. So it’s not totally foolproof.

    The point is, there’s no single solution that works for every person. Better than an article that says “all credit cards are teh evil!” would be something to help us figure out our own psyches and work with our own irrationalities.

  105. quagmire0 says:

    Boy, I’m such a sucker for getting rewards for buying things that I’d buy anyway and paying the bill off every month. :D

  106. Amy Alkon000 says:

    Refuse to become a financial slave to the plastic vendors.

    How silly. Paying with a credit card means I hang onto my money longer.

    I’m not a financial slave to them because I NEVER pay interest.

    But, thanks to the way I put every payment I possibly can on my credit card (including the $3.99 jewelry and $8.99 pants, etc., I buy on eBay because I’m actually quite frugal), I’ll either have two coach class free tickets to Paris in a while, or a free business class ticket even sooner.

    Credit cards are just a method of payment. You have to actually plug in your brain and turn it on before using them to be able to use them wisely — or, as you so ripely put it, to “refuse to become a financial slave to the plastic vendors.”

    PS Have fun renting a car with a debit card. Or getting your money back when somebody or some company screws you.

  107. deserthiker says:

    I use my credit card to pay for my hotel room when I travel. Should I carry hundreds of dollars in cash instead?

    I use my credit card to buy things online. Should I instead drive 100 miles to a major city to buy the things I can’t find locally and pay more for them so I use cash instead?

    I use cash to pay for food (with coupons), clothes (at the thrift store) and gas (mostly I ride a scooter).

    These types of studies are worthless because they don’t do anything to change the way people look at their need for possessions to make them happy.

    I don’t know how the people who commissioned this study paid for it–cash or credit–but however they paid for it they paid too much.

  108. Trai_Dep says:

    Q: Why, at casinos, do they use shiny chips instead of requiring guest placing cash?
    A: Abstract spending isn’t “spending”. At least at an emotional, reptile-brain sense.

    Makes sense the same thing would happen with shiny plastic credit cards. I mean, they’re useful, and for some, they don’t impact spending. But casinos didn’t get big by being stupid, and the study makes intuitive sense.

  109. Yoooder says:

    I’ve found my best way to keep on track with my budget, and to track my spending is to just carry a 3×5 index card with a pen whereever I go. I jot down all my expenses, and tally the score when I get a couple free minutes in the day.

  110. 67alecto says:

    I buy more with a credit card than I would with cash, for one simple reason: purchase protection.

    Good example: I built my own computer a few years ago, and ordered the parts from various sellers – from ones I found online, to ones advertising in PC World, etc. One person kepy my $800 for the chip and never sent it. If I had sent cash, I’d have been SOL. Since I used a credit card, I did a chargeback, got it cleared up in 2 weeks, and ordered my chip from a different source.

    Without chargeback rights, I’d certainly buy less stuff.

  111. TheKingBoar says:

    @Dakine: Exactly! There’s nothing in there about corporations, so if they want to run their business thats their business. Corporations are not out to help you, but they’re not out to get you like you think. They NEED you whether you like it or not. You’ve just had a bad experience because you got yourself stuck in too much debt, and now can’t handle the payments. But that’s not the corporations fault, that’s your fault. You agreed to a contract that said you’d have to pay it back, and if you didn’t read it, again, that’s your fault. And when it comes down to it, I’d take the mileage my Amex Gold Card will get me in a foreign country over what Ben Franklin can get me any day.

    And telling people to go watch movies is a horrible way to make an argument. But there’s no law that says the companies have to set up a payment plan for you. It says that in your contract. I’d do the same thing too, because it’s your responsibility to pay on time.

    There’s no excuse for people who try and blame other people or corporations when they’re the ones who made the mistakes in the first place. Just take responsibility.

  112. peetred says:

    No, we don’t spend more with credit cards at my house, because we have a set budget and we pay our credit cards in full each month just like it was a debit card. Why? Because we only use our credit cards on items we were already going to purchase (and have the cash for), and only to build our credit.

  113. toneotom says:

    Although not using credit cards is the best way to go, you should have a credit card for at least a year to establish your credit.

  114. anatak says:

    Wow! Here’s an experiment for you: The prevalence of credit card acceptance and/or abstract forms of payment. The fact is that fast food started accepting credit cards, why? Because people will spend more on plastic. Cruise ships nearly force you to do all of your spending on ship via your room key / credit card, why? Because you’ll spend more. Is this really so hard to fathom? Maybe you don’t like the correlations drawn from the research, but who cares? Research be damned, it’s already been proven in the market place time and time and time again. On average, people are going to spend more. Maybe you can resist that urge to super-size it, but you are what they call, the minority.

  115. ConsumerAdvocacy1010 says:

    @Dakine: I somewhat agree with you. I’m sure that BoA, Chase, Citi, Capital One, Amex, etc are not there to be your friends, but that doesn’t mean they are out to get you by surprise. All the crap they can do to you is laid out in fine print. Sure, the terms in the contract favor them. Sure, they can change the terms at any time and if you don’t like it…they will close the account when the current terms and conditions expire. Sure they have the right to move due dates around. Sure, some of them employ Universal Default so they can basically jack up the APR for something completely unrelated…Yeah, that makes them slimy and sure, I’ll give you evil.

    BUT, you can be diligent and not get caught by any of their traps. Did you try third party debt restructuring programs? Did you try and transfer balances (got a few myself that were 0% APR for at least six months and no payments for three months – and took advantage of it). If you are careful, you won’t burned very much at all.

    If you feel screwed by a credit card and feel they are doing something illegal or fishy, contact the FDIC.

    Good luck repaying your debts. And yelling at people won’t get them to listen to you (unless you have candy).

  116. anatak says:

    @Eyebrows McGee: Yes, there is a single solution that will work if you actually do it. It’s called a budget, and while you might not get it right on the first couple of tries, it will work. And if you take your spending money for the month – because, btw, you do this at the beginning of the month – for things like groceries, eating out, and clothing, and then sort it according to your budget into envelopes, then this amazing thing will happen. You’ll see that money (wait for it), is finite. Sure, you can blow the food budget on $80 sweaters, and guess what? You’re going to miss a couple lunches. Do that enough, and this other amazing thing will happen – you behavior will change! It does work, and it will work for anyone with the will to try.

    Of course, this method does work much better after you put your credit cards through the shredder and make a commitment to stop borrowing money, but you’re not going to do that, so whatever. Also, credit cards aren’t evil. The companies behind them? Yeah, evil.

  117. chewiemeat says:

    Using a credit card is an irrelevant piece here. Either you don’t mind OWING money or you DO mind it. The credit card is merely an instrument for that. I have a $20k limit on my card and I use it for 95% of my purchases, because 95% of my purchases occurr online – paying my utilities and rent or buying groceries and gifts.

    And then I pay my credit card off in its entirety at the end of the month.

    I suppose if i treated my card as a free $20k, I’d be using it frivolously, but in my mind every dollar i spend on it is a dollar directly out of my paycheck that has to be accounted for within the month.

    For those of you who don’t treat your cards that way. Well… that’s probably the same reason you are being kicked out of homes you can’t afford and are whining about a “whopping” four bucks a gallon for gas.

  118. azntg says:

    @Amy Alkon: As much as I agree with you on this, the original poster does have a valid point (at a stretch)… you do have to sacrifice some privacy for the privilege.

  119. Scazza says:

    There is a flip side to this, using credit cards build CREDIT. So if you can control your spending and use ur CC you will build credit many times faster then you could without one. And what good is credit? Well, try buying a house with low credit… Sure they are “dangerous” but a credit card is a very important tool to survive nowadays…

  120. WraithSama says:

    I use credit for most purchases and I disagree with the OP for one reason: if you think it hurts seeing your cash disappear gradually each time you make a transaction, it’ll hurt much more when you pay that credit card bill at the end of the month and pay a large lump sum. That’s my Anti-Charge ™.

    I used to be pretty loose and easy with cash, but since I started using credit to pay for things, it almost physically hurts me to pay that monthly bill. Result? Spending goes down.

  121. WraithSama says:

    I’ll add to my own post that, even though my wife and I make decent money, when we paid for everything with cash or debit, we lived almost paycheck-to-paycheck because it was easy to ignore how much we were spending.

    Once credit card bills started forcing us to face how much we were spending, I was AMAZED at how fast our checking account balance grew as our spending dropped off sharply. The ONLY reason this happened was because we switched to using credit cards for purchases. That monthly bill is an eye-opener.

  122. ebob9 says:

    I completely disagree with this.

    For the past 10 years, I’ve been almost exclusively using my Debit card to do all purchases. I almost NEVER use cash, the few exceptions are where I have no choice (I keep the same $40 in my wallet for months at a time).

    Because of this, I’m used to treating ‘plastic’ cards like cash. I don’t think I spend more on the rare times that I use a credit card.

  123. unpolloloco says:

    90% of my purchases are on my credit card because I have no desire to be walking around in the inner city with more than $20 on me at any one time (that and that I can’t pay for anything online with cash). Carrying large wads of money around in high-crime areas is stupid to say the least. If my wallet is stolen, then the first thing I’d do (after calling the cops) is call my CC company and have them cancel it. That said, I pay my balance off in full every month and I’m to lazy to go shopping for anything until I completely run out.

    So the morals of my story:
    1) CC’s are more secure than money – best reason to carry one
    2) Don’t go shopping for anything other than what you have determined (in advance) that you need – no impulse purchases
    3) Pay your balance off every month
    4) Don’t spend more than you earn (had to throw the SNL reference in there)

  124. Nakko says:

    I use my card sparingly; I pay it off every month. So if I am only spending money I already in fact have, why bother using credit to do so? To build a good credit history, really, I guess is the only reason. Maybe for an emergency, but I hate people who spend big on credit using that as an excuse.

  125. Manok says:

    cash only

  126. FLConsumer says:

    Hmm… Maybe I’m an oddball, but ever since I went to 95% plastic purchases, my spending dropped substantially (~35%), as I had a nice, clear, real-time picture of where my money was going and where it was being pissed away. Spending too much on lunches/dinners/entertainment shows up very quickly when every transaction’s accounted for.

    Having run my own business for many years (and having worked for others even longer), handling purchases through petty cash is an easy way to get people to over-spend. We’ve implemented a buy-first, reimburse-later w/receipt scheme and have found our reimbursement expenses have dropped. No more “I might as well buy one of these while the company’s picking up the tab” that I’ve seen when petty cash is handed out.

    It also appears many of the credit card issues I see on here are where people get credit cards from banks/institutions they have no other financial relationship with.

    All of my cards are through banks which I have existing, important (to them) financial relationships with. They’re not likely to screw me over considering the ramifications of taking my business elsewhere. I realize this isn’t a strong option for many people. For them, I’d suggest a local credit union or local community bank. They need your business, unlike the large nationwide banks & credit card mills.

  127. SadSam says:

    Based on my own experiment – which only involves two test subjects (my and my hubby), I agree. We put down our CCs in December 2006 and greatly reduced our day to day spending (we use debit). We don’t think credit is evil and we still use it for travel or once in a while to take advantage of a 0% offer.

  128. SadSam says:


    Following up on my prior post. I was not a gal who paid interest on my credit card purchases and I very much enjoyed the CC rewards. But, I found that I spent more (about 100% each month) when I used credit vs. debit. Something about spending money that was already in my checking account vs. spending future money made me change my habits.

    We use Visa debit so we have a good record of our spending.

  129. satoru says:

    @cyberscribe: When you purchase something with credit you are not using ‘your’ money as you so eloquently put. You are in fact paying for the convenience of using their money to purchase a product.

  130. ottawa_guy says:

    I really can’t say in definite if I would spend less with cash, but certainly my spending is regulated with the use of plastic. I usually put all of my purchases on a credit card with cash back.

    It’s nice to have the added features and the safeguards of using a CC for major purchases. I check my statements every day, and always pay in full before the due date. I would think this year I may get $300-$400 of free money just thanking me to use their card.

    One of my relatives wanted to buy some new furniture for their apartment. They told me that they wanted to pay using cash or a check. What a bad idea. I told them if you want to buy this furniture, pay me the cash, and I’ll use my CC therefore you get the protection of using a CC with a major purchase. It also netted me about $25.00 in free money (and who don’t like free money)

    Cash in my mind, I only use at the casinos and slots, and usually I take out the max I want to lose there. It’s harder to discipline yourself with cash because you only see the cash come out once. With a CC you see the purchase and then then the funds come out of your bank account to pay said bill.

    For example, I was given $300 by someone who owes me a bit of cash. I was stupid and didn’t put it in the bank. I kept it in my wallet. Well Saturday night came around, and the majority of that cash was gone with no record of where it went.

    Of course, using credit cards all of the time are not for everyone. Some people are absolutely bad to manage them, and would do better on using cash. Debt managers will always use the cash-managing option with deliquent people, since they know when they use a credit/debit/check card they can’t manage their spending properly.

    Credit cards are a very useful tool. I wanted to buy a nice piece of timeshare in Florida because of the cheap price, and considering my parents timeshare doubled last year alone. Also, there is no more expansion on the resort I was staying at since the county would not approve any more expansion. I went with their interest rate of 19.9 percent over 10 years. I would of paid double for the properly. Since I established my credit by paying my credit cards off in full and on time, I was able to refinance the amount with a major Canadian bank and lower the interest rate to 10% over a 4 year term. My payments are about $30.00 more every 2 weeks, but I get the amount paid off in 1/2 the time.

    I think they are beneficial, only to people who know how to manage them properly. If you are having problems with anything, well then it’s time to cut them up and move on.

  131. bonzombiekitty says:

    I’m pretty good with my spending on my credit card. The vast bulk of my credit card balance is gas, groceries, and utilities. I don’t splurge on groceries, maybe $40/week on average, and the heat in my apt is set at 63 in the winter.

    Other than that, my expenses on the card are maybe dinner once a week and other odd expenses that come up during the month (i.e. flowers for a birthday).

    My spending has gone up within the past few months though because girlfriends are really expensive. So I’m going out more places, going out to dinner a bit more often, and making dinner for two much more often rather than dinner for one – that’s what I get for having some cooking ability.

    That’s all stuff I’d be buying if I was using a credit card or not.

  132. Raanne says:

    hmmm… for me, cash is much easier to spend. Cash is not in my bank account, so i don’t think of it as contributing to my overall amount of money. it feels expendable. By taking the cash out of my bank, i have already “spent” the money in my mind.

    Credit cards on the other hand (which i use for pretty much everything now)are a reminder that whatever i spend it on, will have to be deducted from my bank account.

  133. Fist-o™ says:

    Wow, obviously we Consumerists have a LOT to say about this. With all due respect, the problem is, I don’t really care about “The Average Consumerist Reader”. I want to know what the affluent people of our society, the “Millionares next door”, so to speak, do with their money. And what do those studies show? Did they get rich on 2% cash back rewards on their gas bill? Do they try to “Game” their FICO score so they can get better loans on their next new car? NO!

    As a matter of principle, I got rid of all my credit cards because they really don’t care about you/us. Binding Arbitration, Jacked-up fees, and an additional liability as per identity theft are just not worth it.

    For those of you who think you’re “Being Smart” and “gaming the system” by paying off the balance every month, getting the rewards, etc., you might be fine for a long time. but if something happens, a slip-up, you could get burned. And you can’t sue them. It’s in your contract.

    As far as my “Credit Score”, that’s a self-feeding process. You want better credit so that you can borrow more money. Try not borrowing money, dude! I understand that it’s unrealistic to buy a house without a mortgage, and you might need student loans, but you don’t need to finance a car. or furniture.

    Now. if I can just convince my wife.

  134. pauljunk says:

    This article is total crap. A bunch of idiots with bunk science.

    Of course people who only use cash will spend less. When groceries cost you $100+ a week and gas costs you $50+ and you spend $0-10 a day on eating out for breakfast, lunch or dinner, in order to go day to day for a week using just cash you’d have to walk around with a wad of hundreds in your wallet. Who the hell wants to walk around with that kind of liability. So what happens is people will spend less because they’ll only take out $60-$100 at a time from an ATM and then have to go shopping more frequently, thus additional costs of fuel, transportaion, time and ATM fees. So not only are you wasting all your time and money having to deal with cash YOU DON’T EARN A SINGLE PENNY!

    I use credit cards for EVERYTHING. If a stick of gum is a nickel and I can charge it I will. Why not?! I earn 1-3% cash back and I pay my bill on time in full every month so I do not incur and fees. I get paid by using my credit card $200-$300 each year. If you are stupid and can’t control your spending then maybe you should stick with cash and hope you live near your bank’s ATM machine and a grocery store.

  135. S-the-K says:

    @cyberscribe: What extra expense and hassle with credit cards? I don’t have to pay ATM fees to use a CC, unlike getting cash. Talk about paying banks for the privilege to play games with MY money! I don’t have the hassle of a wad of easily transferable cash bulging in my pocket. If cash gets stolen or lost, it’s gone forever. Credit cards can be canceled right away and the user held not responsible for unauthorized use. I don’t have the hassle of all the fecal bacteria that infests paper currency.

    With credit cards, theres no added fees (if the merchant obeys their merchant agreement with Visa and M/C), there’s just one thing to carry, if it goes missing it can be canceled and damage limited, and I know where it’s been. And on top of all that, the bank pays me for the privilege of using their card and not somebody else’s.

    And if you are cash only, if you want to pay your utility bill or your cable bill or your telephone bill, you have to physically go to their office to pay in cash. That means taking time off from work so you can get there before they close. In the case of AT&T, they charge you a fee for the privilege to pay in cash in person. Whereas paying all these things with a credit card means clicking a button from home.

    Granted, if one did not have a credit card and had to carry around a wad of cash, one might decide to not buy something because of the hassle and expense of cash.

  136. Fist-o™ says:

    Please let me tell you a short story.

    Credit Cards DO affect ME psychologically.

    Lately, I’ve jumped on the credit-card-canceling, Get-out-of-debt bandwagon. I was down to one credit card, that I kept for many months but never used. I procrastinated, and kept telling myself, “I really should just get rid of it… if I’m not using it, I really don’t need it.” But SOMETHING STOPPED ME. There was a block there, making me keep it. Some part of me felt a feeling of security from this piece of plastic sitting in my fireproof box. But to my growing adult self, the conscious thinker, it bothered me! It was like an internal battle of wills: I was looking for an excuse to cancel it; some evidence that it was bad, some intellectual banner to rally my courage and honor, to conquer my fear and justify getting rid of it. So I looked at the contract and read the section on Binding Arbitration. I recalled how some people who have suffered Identity Theft were not backed up by the company, in spite of the stories & belief that a credit card company is all willing & able to help you out. That was the final excuse, my justification for canceling it. My resolve solidified, and I made the call.

    I got on the phone to the customer service line, and then suddenly I had a flutter in my chest. What was that? Why was I suddenly feeling a flash of fear? Was it the security that I felt the card provided? I’m telling you, this freaked me out! ME, the “Smart Person” who never carries a balance… having a psychological reaction to closing the card? Sure enough, there it was. That feeling you get before doing something scary, like parachuting for the first time, or asking a girl to dance at a middle school dance. Oh NO you di-int! Some lousy company’s gonna hold THAT over me? Not THIS cowboy.

    That was all the evidence I needed to know that these cards DO exert a subconscious effect on ME. I cannot speak for ANYBODY else; but it’s folly to assume that it doesn’t. We’re all human.

    The CSR on the phone was all too willing to have me close the account. She must’ve looked at my previous balance history, and saw that I was a “Deadbeat” (Person who does not carry any balance on interest). I told her I didn’t want to agree to binding arbitration, and her response was, “Well did you ever think about cancelling the card?” HA! Wham bam, thank you ma’am, and I’m Credit Card Free.

    The fear is gone, it was gone before I even finished the call. I kept the card because I was going to cut it into a guitar pick.

    I just wanted to share that.

  137. @anatak: Yeah, jackass, I HAVE a budget. And I manage mine electronically. Because if you had READ MY POST instead of just spouting off at random and assuming that everyone in the entire world is just exactly like you, you’d have read that I have tried managing money both with cash and with credit, and that I do much better with credit.

    Moreover, I do not “borrow” money. I have never carried a balance (except the month I got married when the bill got lost in the shuffle and, guess what? my card company waived all the interest and charges).

    Responding without reading makes you kind-of a troll.

    @Fist-o: Out of curiosity, do you KNOW any millionaires-next-door? (By which I presume you mean folks who have a regular job and through good money management become millionaires.) Because I do, and they mostly use credit cards. Pay ’em off every month, yes, don’t use them for long-term credit. But they use them. And most of the millionaires-next-door I know DEFINITELY game that kind of system — they do TONS of research to get the best rewards card and then pick which card to charge on based on the rewards. A lot of them also pharmacy hop like it’s going out of style whenever they do those “move your prescription here, get $15 back” promos. (Which I personally would find exhausting and I’d never remember where my Rx was.)

  138. Erwos says:

    @zentec: Very good point about the gas – never thought about it like that. But, the truth is, for a commuter like me, filling up that gas tank isn’t very much of a choice. I like to think that I try to at least conserve gas a bit, but, honestly, my daily commute is by far the largest consumer of gas of anything we do.

    I think that a lot of the difference is in how you think about the credit card. For basically my entire college career, I was using a debit card for purchases. This was a gigantic hassle, but really forced me to think about what I bought and when. Now that I have a credit card (getting one was a pain, since I had no credit history!), I still retain a lot of that mindset, and think pretty hard about what I buy.

    But, for consumer protection on purchases, credit cards can’t be beat.

  139. @S-the-K: yeah, one of the reasons I went along with my husband’s insistence that we switch to credit-only was that I’d had my purse or wallet stolen THREE TIMES; carrying cash was starting to make me damn paranoid, and boy is it easier to deal with a stolen credit card than, say, a stolen checkbook. And of course stolen cash is just gone.

  140. Fist-o™ says:

    @eyebrows McGee

    No, actually; well, just one other household to which I am related…

    If they do, then, I would be happy to re-examine. All I know, is that right now, at this point in my life, it feels right to not worry about the cards.

    I am willing to admit that I could be wrong, and that later I would change my mind.

    and regarding the Pharmacy Hopping: Funny you should mention that; I just noticed that we got coupons in the mail for same such deal. Pretty sure we’ll do it next time.

  141. Ragman says:


    For those of you who think you’re “Being Smart” and “gaming the system” by paying off the balance every month, getting the rewards, etc., you might be fine for a long time. but if something happens, a slip-up, you could get burned. And you can’t sue them. It’s in your contract.

    And if your wallet, full of cash, gets stolen, you’re SOL. CC companies do work with customers to fix problems. Even for those of us who don’t roll balances.

    No, the millionaires next door don’t get rich off of cashback. It’s the mindset that allows them to discipline their spending that does it. The cashback is merely a side benefit of responsible spending.

    There are people who fit the article’s stereotype, who look at a $10k credit limit as having $10k to spend. That’s one easy way of getting into debt. Or, as some did before the bankruptcy reform, maxed out several cards and then jumped ship into bankruptcy to avoid paying them off. Wait a few years (less than seven) and repeat. THAT’S how you game the system.

  142. firesign says:

    yeah, i’m a sucker, but sometimes it’s necessary. my car needed almost $400 worth of work, and i didn’t have cash to spare so i used a credit card. i avoid using credit cards as much as possible though.

  143. @Fist-o: Hey, if you don’t WANT to do it that way, don’t do it. :) Everybody’s different and should use the tools that work the best for them. My point is just that there’s no particular reason that a credit card CAN’T be part of a disciplined spending/saving pattern, and plenty of the “millionaires next door” use it. I’m sure plenty of others don’t (although I think that’s getting harder in this day and age).

    I’ve had reasonably good experiences with my credit cards (other than when B of A bought one of my other cards, that’s been a nightmare), and on the rare occasions I’ve had problems, the companies have been enormously helpful. I guess part of that is finding the right companies to do business with (AmEx and FNBO for me).

    If I had some of the experiences some folks have had here with credit cards, I think I’d be out of the game too. :) But I’ve not really had problems (knock on wood), and I know from experience I manage spending better with credit cards than with cash. So it’s a good tool for me.

    (And I know SO many people who pharmacy hop … I’d just go mad, I must be missing that slot in my brain that lets you keep track of where you’ve moved your Rx. I can hardly manage to shop at a different grocery store without totally losing track of everything I’m trying to buy!)

  144. Bryan Price says:

    Hmmm. My wife would probably agree that using plastic is bad, but considering that she uses her corporate card for 5 figure expenses, and without those expenses she wouldn’t have a job, I think she’d reconsider a bit. Of course, she gets reimbursed to the penny for that.

    Still, I probably could get by without plastic, I did it before, when we didn’t have debit cards and ATMs in regular use even. Getting to the bank before it closed on Saturday was always a bitch though.

    But my debit and credit cards both come from credit unions, so I’m not getting charged anything for the “privilege”.

  145. @Ragman: “There are people who fit the article’s stereotype, who look at a $10k credit limit as having $10k to spend.”

    I have a friend who does this. She was attempting to commiserate with me about what a hassle it is when you hit your credit card limit, and when she asked repeatedly, I finally said, “I’ve just never had that happen.” She demanded to know what my limit was, and I told her, and she got all excited and was like, “You could go buy a car! Why don’t you go buy a new car? Yours is like 8 years old!” “Uh … because I don’t WANT to max out my card?” “But then why do you HAVE it?”

    I find her life fascinating. They have all these easily-fixed problems, but absolutely and categorically REFUSE to do anything different than what they’re doing … and can’t figure out why they have these problems. (I had to struggle so hard, when they were going, “I don’t know why we can’t afford this expensive dental surgery!” to keep from saying, “BECAUSE YOU FURNISHED A TWELVE-ROOM HOME FOR THREE PEOPLE ENTIRELY ON CREDIT, ALL AT ONCE, WITH UGLY-ASS EXPENSIVE CRAP!”) They shop for the lifestyle they think they ought to have, rather than the one they can afford.

  146. BlackFlag55 says:

    CC used rarely, and only for convenience, particularly for the stronger laws over debit cards regarding fraud, etc. Some times cash is not possible, like ordering through Amazon or Sierra Trading. I can’t hand them the cash. But always pay the bill in full and never “indulge” with the issuer’s money what I can’t justify on my own nickel.

  147. UnStatusTheQuo says:

    I make about $1,000 a year with my Chase rewards card. Each month, my balance is paid off. Each month, I get a percentage of my balance in rewards.

    Sure I’ll take an extra grand a year for having self-control and discipline. That means over the course of my life, I can rake in an extra $40,000 to $50,000 doing that. So, to all the grouches out there, I’ll be retired a year early, so come visit me while I’m on vacation.

  148. balthisar says:

    I’d have the opposite problem. “Cash” to me means spend it, get rid of it, it’s just “petty cash” to me with zero significance. I tend to blow it on crap, because it’s not real money. Credit car is real money, because there’s 100% accounting for it at least twice a month when I pay it off. The ability to manage expenses and self discipline with such an automatic accounting system is beyond compare!

    Why do businesses issue credit cards to employees rather than issuing them cash advances?

  149. darkryd says:

    I dont have a credit card, only a debit card, and even now I’ve restricted myself to only using it to pay my bills online – the rest is cash for the month.

    I’ve been doing this for a couple of months now and its really cut down on how much I spend!

  150. tasselhoff76 says:

    Spending cash does not give me cash back or automatic protection insurance. It just doesn’t. It also leaves me with more to lose if I get robbed. The items I buy with plastic are the exact same items I would buy with the cash and I pay off my balances every month, as I have already budgeted for groceries and gas and whatever other miscellaneous purchase I might have. Using cash often just does not make sense.

  151. aka Cat says:

    I may be spending more on incidentals using a card than I would with cash. But, it’s saving me on the big purchases I used to sometimes put on my card.

    That’s because when I was using debit/cash/checks to spend, my credit card was open and free for any non-essential purchase. I would usually pay it off immediately, but once in a while it would take 2-3 months to pay. But that wasn’t a big deal, since I was only paying interest on that purchase.

    Now that I’m using my credit card (a single credit card) for *everything*, I don’t splurge unless I’m certain I can pay it in full immediately. Because I don’t want to be caught paying interest on the gas, groceries, and whatnot that goes onto the card every month.

  152. coopjust says:

    A credit card is merely a tool. You can use a knife usefully, or you can cut yourself with it. You have to know the rules.

    Firstly, my opinion is that it IS easy to spend more when you’re just swiping plastic, but you have to exert self control. An ide: keep strict control over your credit card by forcing yourself to handle the money. Force yourself to count cold hard cash for your bill every month, then deposit it. When you have to count the money, you realize how much you spend.

    Credit cards have a lot of great benefits though:
    -Buyer protection via chargebacks, you can close an card and get a new one if a merchant is difficult or fraudulent
    -Instant access to your money, convenient- cash can be spent without verification, and while a credit card can be stolen (clerks don’t usually check signatures), you can chargeback (the store won’t be able to prove that it was you instead of a thief, and you’ll get your money back. Or, they’ll actually check the transaction, and refuse it when the signatures don’t match).

  153. Geekybiker says:

    She’s right to an extent. If you already have issues with budgeting and money, a credit card is going to make things worse. Its easy not to spend money when its not in your wallet and you need to make a trip to the bank to be able to buy stuff. However I dont think a CC is a bad thing for people with a good grip on their finances.

  154. wwwhitney says:

    Despite never having carried a credit card balance, I’ve switched from almost exclusively using credit cards to almost exclusively using cash (except for gas and various online purchases).

    I employ the tried and true envelope system where every 4 weeks I withdraw my entire budget from the bank in cash and divide it up into different envelopes. Then I know exactly how much I can spend per week/day without having to constantly monitor my spending.

    In doing this, I was able to cut my monthly spending by ~15%. I’ve also cut out those months where I would go wayyy over my budget without really knowing it (it just takes a few days of splurging). Additionally, I’ve found that it’s helped my relationship with my wife because we now both have complete visibility on our monthly finances.

    I would recommend it to anyone, but for me, budgeting is a leisure activity in and of itself, so your mileage my vary ;)

  155. Konrad says:

    Every other night I go online and pay off my credit card.
    Keeps me informed of just how much I’m spending and ensures I’m never charged for not paying.
    Just trying to build up my credit, I NEVER buy anything that I can’t afford.

  156. Ragman says:

    @Eyebrows McGee: I knew a couple who did the whole rack up debt and file Chap 11, rinse and repeat, as a way of life. They had done it at least 3 times before the reform. And the CC companies would set them up with new cards even just a couple of years after filing.

    OTOH, there’s a couple I know, the husband actually had to hunt to put food on the table as a teen. They were in such a jam that his family had no money, but no welfare (for some circumstance) for a while. Now, he and his wife make six figures, and will retire millionaires through savings.

    Keeping track of cash spent is a hassle, so my wife said just to list our cash withdrawals as food expenses, since that’s where it mostly goes. I find that considering cash on hand to be already spent on food made me spend it more easily, whereas before, I would have to track what cash I spent.

    I think a lot of people who have to get control of debt by ditching the plastic and going cash-only is due to a lack of financial self control. You spend like a kid in a candy store, and have to get away from the temptation. I have the same issue with junk food in my house – if I have candy in the house, I’ll end up getting into it, even when I know should NOT. Solution: Remove temptation, get the damn candy out of the house. Works great for me. I admit I do have that lack of self control with candy readily available. I don’t go into denial and claim that Nestle or Hershey is going to screw us over if we eat their products, when the fault lies with me. Nor do I get on my high horse and bitch out skinny people who always have candy bars and ice cream in the house.

  157. fuchikoma says:

    I live in Canada, and so I buy almost anything over a dollar with a debit card. This draws from my chequing (sorry, “checking”) account directly and I do not pay a transaction fee – that’s on the store’s tab though many convenience stores will charge a few cents if you buy under $3 with it. The card just comes with my bank account, no fees. Free replacements.

    I have a “Global Payment” Mastercard that will pay for things pretty much anywhere, but works the same as my debit card – straight from chequing, no bill, normal credit card fees per transaction (? Well, we usually don’t see those anyway, right?)

    But this society is downright evil the way it makes people into debt slaves so readily. I had to borrow a few thousand bucks for a motorbike and it was almost impossible because I didn’t have a fat line of credit built up, despite banking without incident for around 15 years at the same place (and owning enough shares in my credit union to give me around $4000 usable credit. Wait, my credit union ate that and decided it was $1000, after I BOUGHT my line of credit for my credit card. WTFing F? And bank shares can’t be cashed out unless I move out of the bank’s jurisdiction so even if I leave them they have thousands of my dollars.) I had to get a cosigner to hold themselves liable if I defaulted on the loan.

    For anything over a hundred bucks it’s like it’s just assumed you’re always going to use credit all the time. To hell with that, I’m not going to become indebted and pay interest! I spend what I have… And payday loan joints? They may as well have a burly guy with a crowbar standing behind the counter with the intrest rates they charge – if anyone is desparate enough to use one of these places and needs it, they’re slaves for life! They stay so poor they can never pay it off…

  158. johnva says:

    @wwwhitney: I don’t see much functional difference between the envelope system and using budgeting software that tracks your spending in different categories and informs you when you go over budget. Except that the envelope system is a lot more work.

    Like I said, I think this whole argument is over psychology. Some people need the physical pieces of paper for it to seem like real money for some reason. I’ll never understand their reasoning on that, but that’s great if it’s what helps them keep spending under control. I really don’t understand comments like ones I’ve seen on Michelle Singletary’s blog, where she says that people would never buy a $3000 TV if they had to count the money out in hundred dollar bills. I personally see NO difference between counting out 30 hundred dollar bills and swiping a card, except that the card is much safer and faster. Maybe it’s just general innumeracy in our society, where numbers are just too abstract for some people to “get”.

  159. etherealclarity says:

    For those of you who agree with the article and/or the study: you’re leaving out the most logical explanation.

    If you look at learning, everyone learns differently but can generally be grouped into three learning styles: 1) visual learners, 2) auditory learners, and 3) kinesthetic learners (those who learn by doing).

    Doesn’t it follow that many human behaviors fit some sort of grouping pattern? It seems to me (based on the range of responses to this article) that when it comes to spending, we are all individual but can generally be grouped into three credit spending styles: 1) those who do (or would if they used credit) see a credit limit as free money and therefore absolutely spend more using credit, 2) those who do (or would if they used credit) use credit responsibly and pay off their bill most or all months but inadvertently spend more using credit because the money doesn’t feel as “real”, and 3) those who do (or would if they used credit) use credit as a budgeting tool and thus think of cash as “spent” money and therefore spend less using credit than they would using cash.

    If (for example) each group had 33% of the general populace fall into it, the average would be that people spend more using credit, but the 33% of people falling outside that average are hardly outliers.

    Further, those who use credit gain certain advantages: the option of chargebacks, the possibility of rewards, the saved gas and time they would have used going back and forth from an ATM, and more safety from theft. Therefore, even some of those who lay in group 2 may end up with positive gains or breaking even with these advantages factored in. Also, if a person in group 2 knew that they spent more with credit, they could easily modify their behavior by restricting themselves to fixed costs only and/or large ticket items that they are absolutely sure they would pay for in cash but want the added protection for.

    All in all, I think this tips the scales in favor of the “credit is a tool, which can be helpful or harmful depending on how you use it” theory.

  160. Donathius says:

    One thing that makes a difference to me in paying with cash versus paying with a credit (or a debit card for that matter) is availability. If you only pay with cash there will be times when you want to buy some expensive item but (too bad) not enough cash. If you’ve got a credit/debit card with enough of a balance then you’ve always got the ability to impulse-buy something expensive.

  161. DoubleEcho says:

    What about people like my wife who make credit cards work FOR them instead of against them?

    My wife uses her Amex for groceries and gas, and pays the balance off each month. She’s a frugal shopper and she hasn’t went off on a spending spree since she got the card (and we share our financial info so I know). However, since getting the card last November she’s already racked up over 4000 points.

    As long as we don’t carry a balance over to the next month, I don’t see a problem with it, because eventually we’ll get a bunch of Home Depot/Lowes gift cards and start doing home improvements just for buying groceries.

  162. anatak says:

    @johnva: There is little difference transactionally in paying $3k on plastic versus 30 $100 bills. The outcome is the same, right? I can’t speak for Michelle’s blog, but the difference in the $3000 TV example is psychological. I doubt that this is what they were talking about, but I’d be much more likely to try to get a deal, especially with a stack of $100s in my hand. The hard currency is not only more real to the customer, but to the salesman as well. You wouldn’t pay $3k, but more like $2800.

    As for envelopes vs. budgeting software: The difference is that the envelopes don’t let you go over in the first place. You know what you are spending, and from what category, as you spend it! Its real-time budget hardware.

  163. johnva says:

    @etherealclarity: Very good post. This is what I was trying to get at earlier in saying that there are likely several different subgroups with totally different distributions of credit spending behavior. It’s just stupid to claim that everyone’s spending behavior is the same, like this article does. ESPECIALLY, as you illustrate with your example, based only on lousy statistical evidence like an average.

    @anatak: Well, what I’m saying is that for me personally I don’t see any psychological difference between cash and a credit card, either. If I could negotiate the price with cash I could negotiate it with credit. The store gets their money equally either way (although one might rightfully argue that you should pay less with cash since you’re much less protected). Maybe it’s a case of conditioning: I haven’t been conditioned to feel a magical attraction to pieces of paper with dead presidents on them, but maybe some people have.

    As for the envelopes thing: I also get real-time budgeting electronically. I have my bank account set up so that it sends a text message to my phone when I exceed a certain amount of spending in a category, and I can also check my balance in spending in all categories on the phone at any time. So I have pretty much the exact same setup as far as the information feedback, only more automated and without the risk of carrying cash. Now you’re right that only self-discipline stops me from spending more than the budget once I hit those spending levels. But then again breaking your budget is sort of like taking money from something else to pay for something now. And you could do that just as easily with the envelope method by taking money from a different envelope. It still requires self-discipline.

  164. anatak says:

    @Eyebrows McGee: Well, I’m glad that it’s acceptable for you to assume that I assume that the whole world is just like me. As I certainly did not state or insinuate that. Great reading comprehension.

    And no, sadly I did not read each of your posts in their entirety. I tried – far too long winded.

    When you lost the bill, you found that you are, in fact, borrowing (or “borrowing”). The difference is that you payed it back within the grace period on the other months. Most cardholders aren’t in denial to the fact that they are borrowing money each month and repaying.

    And by the way, your cash ‘disappears’ because it doesn’t have a plan. Placing cash in your wallet and then spending it is not a plan. If you place it in an envelope with the word “FOOD” on it, then it now has a plan. The problem with money isn’t just the medium, it your behavior. Shock. Either way, you can’t plop money in your wallet (paper OR plastic) and expect it all to go ok without a plan.

    But anyways, calling people trolls, swearing, and those eyebrows. Which one of us is a troll? Unless disagreeing with you is now a trollable offense.

  165. johnva says:

    @etherealclarity: I’d also add that it doesn’t even have to be that even of a division between the different groups for the average to work out as higher spending on credit cards. For example, maybe only 10% of people spend more using credit cards than cash, but those people spend a LOT more. Then the average might still work out to be that people spend more using credit cards, even if more people than 10% actually spend LESS using them (but the difference is smaller for those people). And I’ve seen statistics that suggest exactly this: there is a relatively small group of people that are responsible for a large part of the aggregate credit card debt.

  166. anatak says:

    @johnva: You don’t see the difference, because you are looking at it in a very binary sort of way. It’s not necessarily that you couldn’t use plastic AND get a deal. It’s that you are far less likely to do that. Study after study shows that and companies have made changes to take advantage of it.

    And still, your text message tells you that you went over in a category AFTER you have done so. Where as, for us, when the end of the month is drawing near and the food envelope is getting thin, we are very careful about what gets on the grocery list. Rather than even buying what we normally would, going over, and finding out afterward. Yes, you can physically take money out of one envelope to fund something else. Yes, it takes self-discipline not to do so. Even still, if you do rob one envelope for another – in the simple act of doing so, you have made the decision to not spend your money on X and to spend it on Y. Even in this instance, you are conciously making the decision ahead of time, and not after the fact, when you have no choice and the deal is done.

  167. johnva says:

    @anatak: I have yet to see any evidence that this is anything more than an aggregate phenomenon. Yes, studies clearly show that on average people may spend more with credit cards. What I have not seen is a detailed histogram of how that extra spending is distributed within the population. If it increases stores’ profits overall, they won’t care how it’s distributed. But it matters when we’re making statements that supposedly apply to everyone.

    Also, as I said, I am always checking on how my budget is working. I am as aware as someone who uses envelopes of exactly how much spending I have left in my budget.

  168. @anatak: Yes, insulting my eyebrows and talking to me like a retarded two-year-old is EXACTLY how to get your point across. You really couldn’t BE more condescending or ruder. Do you often go around insulting other people’s physical attributes?

    And if you read the post you were responding to, you’d see that my money doesn’t disappear because I do have a plan. And a budget.

  169. @johnva: Anatak is under the mistaken belief that EVERYONE’s psychology works like his does, and that because for HIM using the envelopes functions well and makes him realize he’s robbing Peter to pay Paul, and that because for HIM it’s psychologically different to e-budget than to use envelopes, it is actually impossible for it to work any differently for anybody else.

  170. anatak says:

    @Eyebrows McGee: Once again, nice to know that this behavior is acceptable for you, but not for others. Your little commenter star has gone straight to your head. No, actually you’ve always been like this.

  171. etherealclarity says:

    @johnva: Very true!

    @anatak: Can’t you theoretically get the same effect by keeping a running total of the money you spend each month on you and marking down each transaction as you make it, regardless of whether or not you use cash or credit? That way you know for sure whether you’re over budget or not, and you know exactly what you’re spending and how much you have left.

    A lot of people here are comparing apples with oranges. They compare their own cash-using and concrete-budgeting ways with those who use credit and don’t have a concrete budget, and assume the effect is the same whether or not a person has a budget in place.

  172. anatak says:

    @etherealclarity: You could, I guess. But why? There is just no need to keep track of each and every transaction that way, unless you have a severe spending problem and can’t figure out where it is all going.

    With a cash envelope system, you withdraw your cash at the beginning of the month – say $400 for groceries, $40 for eating out, and $60 for clothing. After that, it’s off the books. The cash is out, and so far as monthly budgeting is concerned, that money is spent. Sure you could keep each receipt and reconcile it versus the written budget. Once again, unless you are having issues, there is no need for that.

    Knowing if you are over budget or not is pretty easy, and requires no tracking. Get in the habit of weekly grocery shopping and with $400 per month, you’ll have $100 to spend per week. $40 per month for eating out gives you $10 per week – one nice lunch or two lunches at the cafeteria or one lunch at the cafeteria and 3 vending machine trips, how you spend it is up to you. It’s not tough to see where you are, by knowing where you are in the month and peering into the envelope.

  173. a_brown-eyed_grrl says:

    A big whatever. I control what I spend, whether it’s cash or credit. I used to overspend on my credit card, now I hardly buy much at all beyond the basics. Still using a credit card and paying it off each month. I write down everything I spend on, so I can see how much I’m charging. I have to think about how much I want something if I have to write the charge down. Fact is, if you’re responsible, credit cards can be used to your benefit. I already have a free ticket to Europe with my miles, and I’m halfway to a second one. This will save us over $2500 on our next trip.

  174. Jordan Lund says:

    I guess I’m not typical… I bought a TV last year that was on sale at Circuit City. Getting a Circuit City card meant 18 months no interest. What the heck… I was buying a new TV anyway and the set I wanted was on sale for $400 off and they were throwing in a $200 camcorder…

    It’s less than a year later, the card is paid off, the TV set is mine. They added a $200 credit because the camcorder was out of stock. I haven’t used the card for anything else and don’t plan to.

  175. GoPadge says:

    Where’s the option for I don’t use Credit Cards?

  176. Jesse says:

    Creidt cards when used responsibly are not that bad of a tool.

    I use them for everything and don’t incur any extra expense. In fact, the one I use for everyday purchases gives me a cash rebate.

    The trick is to pay them off every month and watch what you spend.

    But I am just an accountant, what do I know?

  177. EBounding says:

    So how much more overall do people spend with credit vs. cash? Is it 50%? Is it 1%?

  178. roadapples says:

    This is horse poop. I use my card out of convenience, i dont spend more because im using it, and I pay my bill in full each month. With that said, many cards will give you cash back or gift cards to pick from, which in turns saves me more money at there expense. There are 2 ways to play the game 1.) let the card companies use you or 2.) use the card companies. People who spend more just because they are using a card have poor money management skills….bottom line

  179. EmilySteinbeck says:

    The funny thing is , the credit card companies know about this for years
    thru their own research that they never publish.

  180. Mr. Gunn says:

    The easy expense tracking afforded by cards wouldn’t have any mitigating effect on this, I’m sure.

  181. euterpe35 says:

    I haven’t used a credit card for 8 years. Debit card only. I don’t own a single thing that I can’t pay for immediately. Even my car (used, naturally) was paid for up front.

    I’m not trying to come off all smug here. The reason I don’t use credit cards is because of the huge financial trouble I got into because of them. That goodness it’s all behind me now.

    But I now know myself. I cannot be trusted with anything but (basically) cash.