Wednesday, July 8, 2009

The Simple Dollar

I was compelled to leave the following comment on a blog called "the simple dollar." I used to listen to the Dave Ramsey show pretty regularly until it was taken of the air on our local AM station. I found the callers' stories interesting and his philosophy refreshing. It helped me to remember not to spend more than I can afford and try to save, pay down any debt, and plan for a better tomorrow. The one issue that the "simple dollar" brought up was about credit cards versus cash. I added my two sense, and here they are:

"Dave’s philosophy on cash only makes perfect sense. It’s the psychology of parting with cash versus swiping a credit card. I think it’s probably even easier to spend money with a debit card than to actually, physically hand over cash.

The one area that I don’t think Dave gives enough attention to is people who already curbed their spending habits and want to take advantage of rewards that credit cards give. My american express card gives me 5% cash back on gas, groceries and some other items (which make up most of my budget) and 1% on everything else. In September, I’ll be getting something like $300 cash back for buying things that I already would have bought. The question is whether I would have spent $300 less on gas and groceries if I’d been paying with cash. Good question, but I don’t think Dave just dismisses it out of hand because he’s so convinced that credit cards are evil, which is pretty accurate. The one other argument I heard him make to a caller on his show was that all it takes is one late payment and/or having to pay the crazy interest because you can’t pay the balance at some point, and all those “rewards” are wiped out.

I’m curious what others think about this. Is it better to just avoid the whole credit card realm and stick to cash, or take advantage of the rewards they offer?"

Here's the actual website:


Joel Kelderman said...

Several studies have been done and any retailer will tell you that people that use credit cards spend 25-30% more than people who don't. In fact, just today Tesco, a huge retailer in Europe, said that people who use their credit card spend 30% more per trip into their stores. When McDonalds started accepting credit cards their average sale went from 4.50 to 7.00. If you are disciplined, credit card rewards are nice, but clearly the majority of Americans are not.

Investing Author said...

Joel. Thanks for the insights. Does this mean you don't use a credit card?