Tim Jones wrote a rebuttal to my last credit card post. I figure I would write a rebuttal to his rebuttal. I always welcome other people’s thought since there really isn’t a right or wrong answer to this question. What is right for me maybe wrong for you.
In his rebuttal, Tim made the argument that people with credit and debit cards spend an average of 12-15% more than people with who use cash only. First of all, a debit card is the same as cash so the studies are flaw from the get go. As for the higher spending, people with credit cards have higher income than people who don’t, so ya, they would spend more money. Time then ask this question:
Take out a $100 bill and take out your credit card. Lay them both on the counter for your next purchase. See which one hurts more to spend — you don’t need a fancy study to know which one is harder to spend.
For me, the cash would be harder to spend but it’s not for the reason Tim thinks. The $100 bill would be harder because I would feel ripped off because I’m not getting any reward points or cash back from it. To me, the $100 bill or credit card are one and the same because I am not emotional about money – it’s nothing more than a a way of keeping score.
Living On Cash Is Dangerous
Another thing Tim didn’t factor in is the danger of living on cash. I charged over $140,000 last year to my Visa card, plus all my cash purchases. If we assume that the average person living on cash carries one week of spending, that would mean I’ll be carrying over $3,000 of cash on me at any one time. Let’s forget about the danger this creates for a minute and look at the following question; which do you think would create more impulsive spending: having $3,000 of flash money in your pocket or a Visa card?
Technically, I don’t really live on credit. There has never been a time when I charged for something and didn’t have enough funds in the bank to cover it. If you have $1,000 in the bank but charged a $2,000 purchase, you’re living on credit. Since I charge for everything, I can’t say I’m living on cash. So what I am doing? I’m living within my means. If you don’t live with in your means, it doesn’t matter if you live on cash or credit.
It’s All About Financial Responsibility
The media and blogs like Tim’s make it sound like most people can’t handle their credit card debt when in fact, 50% of all credit card users pay their balances off in full every month. The other 50% that run a balance pay for the all the perks for the 50% who paid off their balances. I really don’t have a problem with this because I know that in order to enjoy my perks, someone had to be a dumb ass with a Visa. And it’s really your choice as to which half you belong to.
Too many people blame their financial problems on outside factors when in truth, the problem is staring right back at them in the mirror. It’s not the credit card that got you into debt, it’s you. No one held a gun to your head and forced you to apply for a Visa. No one forced you to charge that new 50″ plasma screen on it. In the end, it’s all about financial responsibility. If you can’t be financially responsible with your money. If you can’t control your spending. If you can’t live within your means. Then it doesn’t matter if you live on cash or credit. You’re screwed either way.