The Number 1 Reason Why I Don’t Live On Cash

Visa Dividend Check

Remember my post back in December explaining why you should never live on cash? Well, I like to present reason number one on why I don’t live on cash. Today, the mailman dropped off a letter. Inside the letter was a check from TD Visa for $1,408.23. The amount represents my “dividend” for 2008. My visa card gives me 1% cash back on anything I charge. Those who are good at math will be able to work out that in order to receive a $1,408.23 dividend, I would need to charge $140,823 to my Visa card in 2008. That brings up the question, what the hell did I buy?

What I charged to my Visa isn’t the point. The point is, had I paid for those purchases in cash, I wouldn’t have received the Visa dividend. While 1% doesn’t sound like much, over the course of a year, it can add up to a nice night out on the town. Now some people living on cash may say that if I flash cash, I could get a discount bigger than 1%. In cases where a merchant offers a cash discount, I take it and don’t use the Visa. For most merchants however, flashing cash won’t give you any more discount than flashing a Visa.

Whenever possible, I put every purchase I make on my credit card. It’s amazing the number of people I’ve met who tell me to live on cash because credit is bad. The only thing I have to say to them is they don’t know how to manage their money. If you’re the type of person who shops impulsively and doesn’t keep track of your spending, then a credit card is probably not for you. However, if you always live within your means and always pay off your credit balance in full every month, then a credit card is a great financial tool and one that will make you money.

A cash back or reward credit card doesn’t work if you don’t pay it off every month. The interest on the charges will more than kill off any rewards you can ever get. I’m happy to report that even though I’ve charged over $140,000 last year to my Visa, I was able to pay the balance off every month and incurred zero interest charges.

Now I just have to figure out what I’m going to do with this dividend check. Valentine is coming up so I may blow it on a nice romantic dinner date with the wife. It’ll be charged to the Visa of course.


75 thoughts on “The Number 1 Reason Why I Don’t Live On Cash”

  1. Mubin says:

    okay, now tell us what you bought 🙂

    1. I personally have to agree with John!! I have a CIBC Dividend visa – 1.25% cash back on mine

      I got a dividend check just shy of Johns, at $1200 ish this year!! Definitely helps out during the Christmas season!! 🙂

      1. Ben Pei says:

        Thats too much for Christmas!

  2. y0mbo says:

    Yes, but you are still living on cash because you don’t buy what you cannot afford. You are just using the credit card system to your advantage. This is also what we do, but we don’t buy things if we don’t have the cash for it in the first place.

    1. SEO Tips says:

      Agreed, excellent point.

      You may be using a credit card but not for the primary reasons credit cards were produced in the first place. They were produced so people who didn’t have the finances at that precise time could pay for the products/goods with the credit card and pay it back at a later date.

      Although in prinicipal you are doing this, you already have the money at hand to pay it back so there is no risk of getting in to debt.

      Credit cards are evil in many ways, they make the less wealthy people believe that they can have all the materialistic goods they could dream of and not have to worry about paying it back. However the trick is that they add interest and if you dont pay it back BANG!

  3. Eric "Shuck" says:

    I have been doing this same thing for a couple years now, of course I don’t charge that much to the card, but I get 3% back on all purchases.

    CreditCards.com is a good place to start looking for a cash back card.

  4. I do the same thing except that I use a Capital One miles card. Just from my spending this year I’ve accumulated enough points for a 52″ flat panel TV!

    1. Paula says:

      Hope you buy that 52″ flat panel tv thru one of my Amazon links!

      (The Samsung Touch of Red’s are sweetness personified…)

  5. Michael Kwan says:

    As you said, credit is not bad. It’s mismanagement of credit that is bad. I don’t quite get a dividend as large as that, but I tend to put most of my purchases on plastic too.

    1. Me neither, my cashback its a lot smaller than John´s. There are mor advantages using plastic than paper money. For instance if you lose you credit card you can report it and have a new one, try to do the same for a lost wallet with 1000 dlls in it, you will never get it back.

  6. You are right – when you can pay the balance on time.

    However, one way to be able to get such a cash-back is certainly the application of good and sound advice in financial matters first.

    But congrats on the fine results. You deserve it, so go have a nice dinner.

    Have a nice weekend. 🙂

    PS: Please don’t eat some of the more scruffy things you used to eat a couple of years ago when I first heard of you. 😉

  7. Agent 001 says:

    I am yet to use a real Credit Card so have no idea of it. I will love to use credit cards. They are easier o use. But being a student it is difficult for me to get Credit Card. I once bought a Virtual Credit Card.

  8. Even if you receive a lot of cash or checks you can still implement this method. Stockpile the checks and what not and hand them over at when its time to pay the bill. Nicely done!

    People always want to use Pay Pal to pay for services I tell them I’ll wait for the check!

  9. Do you think you would have purchased $140k worth of stuff if you had to use cash only? I wonder if you would have saved over $1,400 by using cash and not making any quick buys. I know I have a weakness for tech stuff or toys and find myself buying more when I use credit.

    1. John Chow says:

      It would be foolish for me to say there ware no impulse purchases among the $140K. Yes there were. After all, I’m only human and have a weakness for toys as well. However, not having a credit card wouldn’t have made a difference on whether I would have purchased the item or not because I would have had cash (or the debit card) with me.

      1. SEO Tips says:

        Overall John I believe your in the wrong situation to be able to argue that Credit Cards are good.

        Whether the people who have the credit cards are wealthy or not the Credit Card companies are stilling managing to make a killing of the overall market. This may be because wealthy people cant manage their money or because the poorer people with credit cards are pulled in by the matierialistic world and soon after realise they could’nt afford the goods.

        Overall though your a minority John, most people don’t profit from credit cards most people are in more debt not because of credit cards but because of their human instinction when shopping, it is much easier to use a Credit Card than cash and for most people its not because they get rewards but because it feels easier, they dont have to pay for it straight away.

        Just my 2 cents.

        1. John Chow says:

          I really don’t know where you get “Most people can’t pay their credit card debt” from. 50% of all credit card users pay their balance off every month. Maybe the people you hang around all have running credit debt and you assume that most of the population is like that. It’s not.

          It’s not a crime for a bank to make a killing on the market. Just like it’s not a crime for a blogger to make a killing from a blog. I call that good marketing. While Obama may try to change it, last time I checked, this is a capitalist country.

          1. Jake says:

            I just wish banks would be making a killing on the market. No such luck. Market for credit cards is not that open here in Europe. I have to be content after obtaining a credit card with no monthly fee, 30days of interest free payback time and few bonus programs to local retailers. Not exactly cash back, but close.

            One notion to this whole “cards are evil” debate. I don’t think credit card is a bad invention, but mine would have had 10% minimum payment as default. I had to opt for paying back 100% every month. But yes, banks and other financial institutions are just trying to get by just like smaller market players like professional bloggers.

          2. SEO Tips says:

            You want to know who I hang around with, University students…we are ALL in debt pretty much so yeah perhaps I am a little bias towards the overall population but still.

            Perhaps its also because I am from the UK and I am not speaking globally here because well I don’t have much information given to me about global debt crisis but instead more about UK.

            However this is a fact for the UK
            “More than one in ten people have problems meeting their credit card debt repayments.”

            Quite shocking really.

            Another thing we should worry about, well I saw we but more the US and Obama definitely is the $52 trillion dollar debt that the U.S.A is in if you include everything together. Obviously if everyone else was to pay back the US then this would go down but still, something to think about.

          3. John Chow says:

            1 in 10 people? So 10% have problem with credit card debt. That is shocking. Shocking low!

          4. SEO Tips says:

            I sense a hint of sarcasm there. Although I realise its know where near 50% its still too many.

            Perhaps I am a little more bias towards this because of the media attention and the spin that they bring on credit cards currently.

            Either way its a good idea what your doing, if you are the kind of person to manage your finances.

  10. Tyler says:

    Credit card debt sucks. yes if you pay off you monthly balance then the cash rewards work in your favorite. I’d say majority of the people carry a balance month to month without paying it off so you’re earning the credit card companies money! boo! to the credit card companies!

  11. Colin Dean says:

    Just before I moved in May 2008, I signed up for a BP Visa. I got 10% rebate on gas, 4% rebate on dining, and 2% on everything else for 60 days. This was more than enough time to get moved and settled in to my first real apartment. I had to buy a lot of stuff and put almost everything on that card. Within that first 60 days, I had accumulated more than $100 in rebates.

    After the 60 days, all the rates are dropped by half. BP is already among the cheapest gas (plus it’s not middle eastern). Unfortunately, the card the backed by Chase Bank–friends and family have had problems with Chase but I have yet to encounter these problems.

    I, like you, John, do not carry a balance because I live within my means. Credit cards are not the enemy–they are like insurance for that bad month when unexpected expenditures hit hard, but protect only against the requirement to pay immediately. Rather, desire is the enemy, and such leads to poor money management and unmanageable debt.

    “If we live beyond our means, we are destined to live beneath our means.” – Congressman Dr. Ron Paul

    1. Paul U says:

      you have a point there.

      I will like to add that it is harder to carry a cash than a credit card because the cash is very enticing to pickpockets and holdupers.

      1. Sire says:

        That is unless you are one of the foolish who carries his credit card in his wallet complete with pin number, something that many people do for some stupid reason. Also you have to be aware of who is behind you when withdrawing cash that they don’t see you using your pin. It actually amazes me that some people actually use credit cards to withdraw cash as it is my understanding that you pay interest on the withdrawal from the moment you take the cash.

  12. chris kamens says:

    I prefer to live on cash, screw credit cards, if i need one i just go to the store and get a prepaid one, its easier, and you know for a fact you cant screw up your financial future

  13. yes nowadays, almost every item purchased is premium priced for build-in coupons, points….credit cards with build-in rewards, if you don’t use them then you are punished by leaving money on the table. You are forced to carry stacks of cards as thick as deck if you want the lowest price.

    And ofcourse, anoter benefit by using a credit card is you get to build your credit score history for free:) the higher your score the lower the interest, and more saving coming your way, it is a vicious cycle of benefits …

  14. Melody says:

    I actually don’t have bad credit..or probably credit at all. I think I just feel safer (in the city of philadelphia) knowing that my money is in the bank, rather than in my pocket..

  15. Sire says:

    Actually my credit card doesn’t offer a cash dividend as such, but it does offer a points system that I can convert to cash or goods which is just as good. The thing about credit cards is that you have to be careful that you don’t fall into the trap of borrowing more than you can pay back, as this is a trap way too many people fall into. I personally only use the credit card when I know I have enough cash to pay any purchase off in it’s entirety so as not to incur any interest charges.

  16. Greg Ellison says:

    You just need good control on your money. Most people can’t live like this. Greg Ellison

  17. Tran Harry says:

    The only thing I have to say to them is they don’t know how to manage their money. If you’re the type of person who shops impulsively and doesn’t keep track of your spending, then a credit card is probably not for you.

    The ironic thing about this statement is that most people who use cash aren’t shopping compulsive. And those who are shopping compulsive are fueled by the fact that they have credit cards to use. These people usually spend up to the amount that they are given in credit cards, and probably don’t live with much cash on hand.

    Responsible people can spend money however way they choose to and still remain responsible whether it is by cash, check, or credit card, but those who aren’t responsible won’t be responsible even if it was all in cash, they could simply cash each weekly paycheck and spend it all and end up with $0 sum gained at the end of each month.

    1. Sire says:

      I think that the problem for some people with credit cards, especially the young who seem to always be targeted by these companies, is that they don’t seem to realize that the money they are using is technically not their own and it has to be paid back. In essence it is really a loan, one that comes complete with a very high interest rate. That bit of a dividend that JohnChow was able to achieve wouldn’t cover the amount of interest many people are forced to pay on their outstanding credit cards.

  18. Cal says:

    John, you are right on target with this. But the credit card lifestyle is not for the undisciplined, as you pointed out in your post.

    As always, excellent money management wisdom.

  19. Do you have a Hussein as your middle name?? 🙂

  20. Joseph says:

    Did you pay an interest to visa this year for you purchases ?

    1. John Chow says:

      I guess you missed this part of the post, “I’m happy to report that even though I’ve charged over $140,000 last year to my Visa, I was able to pay the balance off every month and incurred zero interest charges.”

  21. Give your wife a nice gift!!

  22. Luke says:

    I go to college and my bank is in my hometown (which my college is not) so I use my debit card for all my purchases. I have not setup a credit card to get rewards for my spending, but I plan to soon. With the prices of the books I have to buy for my classes I would get a nice rebate at the end of the year on those expenses alone :p

  23. Great job! However, cash is King – especially now, Many stores when asked will offer you a discount when you are offering cash. The merchant saves the interest rate from the bank and whatever other reason they are willing to offer you a good discount.

    1. John Chow says:

      The only store that will offer cash discounts are small ones. The big retailers won’t give discount for cash and frankly would rahter you pay by credit or debit. Handling cash cost money. Those Armour car service don’t come cheap!

      1. Jake says:

        Cash costs money for retailers, but having enough cash in registers costs more than armored car security service, which is just small part of the whole liquidity system.

        Credit card readers are not free either, which is the reason that many retail chains and especially department stores all over the world have opted for special focused points of payment system. This works so that any store floor has just few registers and they are in common use (many shop-in-shops use the same terminal that has separate person in charge of billing).

        Another very important aspect in this is that account activities are difficult to embezzle but cash is easier to take. I’d say that security issues are ultimately the reason for retailers to favor cards. So here we are again, back to the armored car service. 🙂

  24. Reyn Aria says:

    I believe it depends on people’s financial behavior. For me, credit card is a great tool. I helps me track my expenses and most of all, it gives me the convenience to not bringing a lot of cash. But some people loathe credit card because it can drown them into huge debts. They blame credit card for THEIR lack of money management. They blame the tool for their lack of ability.

  25. Matt says:

    “That brings up the question, what the hell did I buy?

    What I charged to my Visa isn’t the point.”

    Yeah that makes sense…

  26. Manori Money says:

    hahah thats a nice return… Well I do the same so I can get miles instead of money back…. because I love traveling….

  27. As you said, credit is not bad. It’s mismanagement of credit that is bad. I don’t quite get a dividend as large as that, but I tend to put most of my purchases on plastic too.

  28. Phil Freo says:

    I use a credit card for the ability to get cash back, but also so that I can automatically track spending categories through using http://Mint.com

  29. wisdom says:

    way to be smart with your money John… Credit Cards can sure help give you additional perks if you pay them off in full every month.

  30. It’s a form of advertising that pushes people into getting a credit card. It’s a come-on that only huge spenders would benefit greatly from.

  31. Those 140 G’s were for all the Twitter contest you’ve been having lately 🙂 Wow, those contests add up!

  32. I also use my credit card. The only time I really use cash is for something that’s around $5 or less.

  33. SEO Tips says:

    Thats incredible, I never actually realised you could do that too. $1,400 to me personally is quite a lot so well done there you actually profited from having a credit card pretty much unheard of in todays circumstances.

    Your going to make the bank go bust now 😛

  34. in ear says:

    I agree wholeheartedly. Part of the reason the US is in the financial crunch it’s in, is due to people who outspend their means. Used responsibly, credit is a wonderful thing.

  35. Ben Pei says:

    Man why are we getting so serious with this? Everyone has their own style of living..

  36. John, now you can treat yourself out to about 7 dinners 😀

    Please do tell us how many % of the total charges is related to food 🙂

    -Mike

  37. Silvia says:

    The credit card with a great accountant is a nice little thing.I love it! But cash money is good as well.I choose both.Using depends on the situation which I live on.

  38. reflux dm says:

    yes john….cause we can take many benefits from our visa card, especially if we do much transaksion using visa card

  39. maybe i should get myself a card.But the problem is i dont really buy anything anywhere.thats the problem i feel.

  40. I believe that every little bit of money saved or earned is good money. I personally don’t remember the last time I used cash…

  41. Lizwi says:

    Credit card is cool but can put you into boiling hot debt

  42. I don’t understand all the negative feedback. If you can use credit cards and earn enough money to pay off the balances every month, plus get a reward at the end of the year, why not??
    I just opened a Chase checking account because they will deposit an extra $100 in my account. No monthly fees, I may keep the account after six months, or I may not, but why not take advantage of perks companies are willing to give?
    I still have my primary account, Chase will be secondary. But I don’t see what’s wrong with using credit cards if you can pay the balance every month, and you get cash back at the end of the year.

  43. Josh Potter says:

    I have a debit card instead of a credit card, well I have a credit card but i don’t use it incase I go in debt….

  44. Carol Oon says:

    Although charging $140,823 to a Visa card in a year’s time could be a substantial amount to some people … But come to think of it, it’s definitely still better to spend on some stuff that you love than to lose your hard earned millions in the Madoff Fraud, don’t you think so?

    I like your reply when you said “It’s not a crime for a bank to make a killing on the market. Just like it’s not a crime for a blogger to make a killing from a blog. I call that good marketing …”

    And your honest reply that “It would be foolish for me to say there ware no impulse purchases among the $140K. Yes there were. After all, I’m only human and have a weakness for toys as well …”

    By the way, it will be a wonderful idea to give your wife, Sarah that “nice romantic dinner” that she so deserves … After all, behind every successful man, there is always a supportive wife. 🙂

  45. Silvia says:

    I think it is better to spend money on something you love than to lose it in the Madoff Fraud or some other place sure if it is not its misfortune.

  46. What a nice present visa gave you! 🙂 You are lucky you can control your expenses. Many people can’t.

  47. Scary Article Man…. Even though u can say pay it off in full i know plenty of people that have tried credit cards and have put thousands of dollars of debt on themselves… Now myself…. I pay it off in full which i recieve points and get free gift cards every $2,500 i spend….. So It is definitely worth it if you are smart about it.

    Thanx

  48. Great post John. Another good reason I could think is when you charge to a credit card vs cash, every expenses you’ve made are recorded in the credit card statement. Nothing escapes that. That information can be very useful for lots of people.

    Peter Lee

  49. I need all these to buy a Mac book Air! Help!

  50. Amex card at costco can offer a good deal too. Ranges from 1% to 3%.

  51. That’s the big thing, control, which people have a problem with.

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