In Debt? Go Cash Only

Bob Sullivan’s clean credit card tactic is a great, but dangerous, idea. It works for someone with a little bit of credit card debt and is diligent about paying it off. It can be disaster for someone slipping further and further into debt, giving them a false sense of financial safety.

It’s like buying a diet Coke and a Whopper – it makes you feel good but it’s not good for you.

I have a very well intentioned friend who has over $10,000 in credit card debt. He has a well paid job that lets him easily make the payments on his credit card debts, as high as they are, and he has a great credit score (they love his monthly payments!). Every twelve months, until recently, he would roll that balance over to a new card with a balance transfer and then use the old card as his main credit card (it was now “clean”).

He was smart enough to know that you don’t use the new card, with the balance transfer, because carrying a balance nullified the grace period (as Bob mentions), but he would simply accumulate new debt on the old card. His problem wasn’t math… he just kept slipping back into old habits of buying the latest shiny gadget. He was in love with the idea of getting a $100 item today and only paying $5 a month on it.

What changed? Last year he tried to continue his old cycle and learned that 0% balance transfers were, for the most part, gone and his monthly payments ballooned. He was still fine, he was just paying a lot more. That’s when he asked me about balance transfer offers and I learned about his eye-popping debt. I pointed him to this calculator and that’s when it hit him. 15+ years to pay off his debt and thousands in interest.

Now he’s abandoned all of his credit cards and gone to a system where he uses only cash. One data point doesn’t make a case but the Farhat family saved 24% when they went to cash only. They experienced some headaches, such as waiting in line at the gas station to pay the attendant, but the savings is clear.

Using a “clean” credit card may sound like a good idea in theory, but my friend was doing it (albeit not knowingly) and it was only letting him slip deeper into debt.

Jim writes about personal finance at

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