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Old 07-30-2009, 05:52 PM   #21
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DW and I tried the cash vs. CC experiment and found that we spent LESS with CC. The reason is simple: accountability. At the end of the month, we can see exactly how we spent our money. With cash, we found that the temptation to fudge the numbers was just too great (spend your gas money on hobbies and use higher gas prices as an excuse to ask for more cash before the end of the month for example). There is no hiding from the CC statement. The first year we started paying for everyting with our CCs and tracking expenses to the cent (downloading transactions from the CC website takes seconds), our expenses went down by $3K. There is no going back to cash for us but YMMV.
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Old 07-30-2009, 05:58 PM   #22
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Originally Posted by FIREdreamer View Post
DW and I tried the cash vs. CC experiment and found that we spent LESS with CC. The reason is simple: accountability. At the end of the month, we can see exactly how we spent our money. With cash, we found that the temptation to fudge the numbers was just too great (spend your gas money on hobbies and use higher gas prices as an excuse to ask for more cash before the end of the month for example). There is no hiding from the CC statement. The first year we started paying for everyting with our CCs and tracking expenses to the cent (downloading transactions from the CC website takes seconds), our expenses went down by $3K. There is no going back to cash.
Your issue isn't with cash vs cc - it is budgeting+ /tracking++ and honesty*.

+Excel spread sheet
++write down what you spend & enter in Exel
*Honesty - ??
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Old 07-30-2009, 06:01 PM   #23
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There is no such thing as a free lunch.
If you want to ER use cash more.
I'm not buying it either. Regardless, whatever the "average" person does is not what I do. I know that I simply decide if I need to buy something and then do it. Since I do get rewards with the card, cash may be a disincentive to buy, but that would only defer the purchase until I can use the card. If it can't be deferred, then the cash is used. Total spent is the same.

There is no free lunch, but often offers are made to a general public with the plan to make out on average. If you can play the game within the rules, and win on the margins, it's as close to a free lunch as you can get.

Of course, the CC transaction is in the price you pay, but I can't change that by using cash. So rewards is the best I can do.


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I tend not to use mine at all under $10 as a courtesy to the merchant.
I often do this, but then I get a pocketful of change that I never use. I used to see the signs posted, "NO CC under $X", have not seen one in a long time, so I don't worry too much about it.

I bet I have not hit an ATM or bank for a withdrawal in over a year. I use the card for almost everything, and the occasional "put lunch on my card, and my friend gives me cash" seems to keep my wallet at the $100 that I feel comfortable with.

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Old 07-30-2009, 06:11 PM   #24
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Your issue isn't with cash vs cc - it is budgeting+ /tracking++ and honesty*.

+Excel spread sheet
++write down what you spend & enter in Exel
*Honesty - ??
Wow... Time to get off this thread.
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Old 07-30-2009, 06:25 PM   #25
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If you back up your suspicions with some studies that would be helpful.

As to the spending increase; neither of the examples you give would be included in the analysis.
I don't see how you can completely strip out those situations. If I go somewhere and spend $5, I pay cash. If it's $20, I pull out the plastic. I don't buy what I need for $5, pull out a $5 bill, and then compulsively buy something else for another $15 and pull out the CC.

And did they norm for the people who are compulsive and can't stop spending money they don't have? Can we confine these studies to people who pay their balance in full each month? Of course the compulsive spenders won't be using cash; they don't have it!

The fatal flaw in these studies is assuming that the payment type drove the level of spending rather than the other way around. It's a classic case of mistaking correlation with causation.
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Old 07-30-2009, 06:48 PM   #26
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I often do this, but then I get a pocketful of change that I never use. I used to see the signs posted, "NO CC under $X", have not seen one in a long time, so I don't worry too much about it.
Yeah, but once in a while I could go to a Coinstar machine and cash it in for an Amazon gift card with no fee.

(Oh, wait -- if I'm doing that I MUST be buying something at Amazon I wouldn't have bought anyway, so it's costing me money. Oh, noooooooo!)
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 07-30-2009, 07:05 PM   #27
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The problem with these studies is it's a bit like television ratings, I have never been asked to participate nor do I know anyone who has. So who are their case studies, because without that information about their sample, how do we know that the outcome relates to us.
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Old 07-30-2009, 07:25 PM   #28
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Although a person has be educated in general or in a particular field they may not know the true cost of cc transactions.
We all are paying a cost for the use of cc.
If merchants were allowed to charge less for paying cash we would be better off (some/most states prohibit this.)
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There is no such thing as a free lunch.
If you want to ER use cash more.
Statistically they found that on average you will spend 12-18% more when making a purchase with a credit card as opposed to cash. They also discovered that the average McDonalds transaction increased from $4.50 to $7.00. When they looked at vending machines, the average transaction size nearly doubled.
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If you back up your suspicions with some studies that would be helpful.
As to the spending increase; neither of the examples you give would be included in the analysis. Even if they were; considering the number of cc transactions, it is very doubtful if they would skew the numbers in a way to cast doubt on the general assertion - people spend more with cc.
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Your issue isn't with cash vs cc - it is budgeting+ /tracking++ and honesty*.
Dex, let me see if I understand how this works:
- Make flat assertions with little or no room for discussion
- Provide links to studies which may or may not be credible, with little or no room for discussion
- Accuse other posters of insufficient evidence or inadequate logic, neither of which is worthy of discussion
- Raise the integrity flag and end the discussion.

Exactly why are you posting on a discussion board instead of running a blog?

*Break*

I don't know how you guys carry $100 around in your wallet. Around our house I'm the mobile ATM for spouse & daughter. It does get reimbursed if required, but I don't think spouse has used her ATM card in months.

When we buy our weekly Costco pizza, I use as much of my spare change as possible. Otherwise it'd pile up with no place to go-- I never carry change in my pockets but I'm always picking it up off the ground.

I'll pay cash if the merchant/contractor offers a cash discount, or if we're making a Craigslist buy. Otherwise I use a credit card as much as possible.
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Old 07-30-2009, 07:28 PM   #29
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From the article:

Quote:
...we have to look at the behavior of people who use credit cards, versus those who don't.
Saying that you will spend more money if you use your credit card is very different from saying that people who use credit cards spend more money. Totally flawed conclusion.

We use the CC for everything except small amounts. For those I've tamed the change monster. I did it by becoming an old geezer and carrying a change purse.
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Old 07-30-2009, 07:47 PM   #30
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Pre-FIRE, cash flowed from the bank to my pocketbook to a variety of vendors. Amazing how that happened!
Post-FIRE, anything over $5 or so, I use my credit card with cashback rewards. If I am out of town, I tend to use more cash at smaller or unfamiliar vendors for ID theft control reasons.
I keep about $40 in my pocketbook at all times. I keep a nice sized "cash stash" on hand in the wintertime in case of prolonged power outtage, when cash becomes king. I usually have most of it left over all summer. Next winter, rinse and repeat.
I also keep an emergency $20 bill in each car. An old habit carried over from the starving college student days.
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Old 07-30-2009, 07:53 PM   #31
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One reason I charge everything is that I hate carrying change. I even charge stuff that is less than a dollar. I have no doubt that I'd spend less if I paid for everything cash, but I live so below my means as it is.........
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Old 07-30-2009, 08:26 PM   #32
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Originally Posted by ziggy29 View Post
I don't see how you can completely strip out those situations. If I go somewhere and spend $5, I pay cash. If it's $20, I pull out the plastic. I don't buy what I need for $5, pull out a $5 bill, and then compulsively buy something else for another $15 and pull out the CC.

And did they norm for the people who are compulsive and can't stop spending money they don't have? Can we confine these studies to people who pay their balance in full each month? Of course the compulsive spenders won't be using cash; they don't have it!

The fatal flaw in these studies is assuming that the payment type drove the level of spending rather than the other way around. It's a classic case of mistaking correlation with causation.
The answer as to a methodology is found in with the McDonald's example.
McDonald's computer identifies those bills paid with cash and those paid with cc. (payment method is usually noted on receipts also)

"They also discovered that the average McDonalds transaction increased from $4.50 to $7.00."
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Old 07-30-2009, 08:34 PM   #33
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Originally Posted by FIREdreamer View Post
. With cash, we found that the temptation to fudge the numbers was just too great (spend your gas money on hobbies and use higher gas prices as an excuse to ask for more cash before the end of the month for example). There is no hiding from the CC statement. The first year we started paying for everyting with our CCs and tracking expenses to the cent (downloading transactions from the CC website takes seconds), our expenses went down by $3K. There is no going back to cash for us but YMMV.
"Fudge the number" = not honest? or did you mean the food?
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Old 07-30-2009, 08:35 PM   #34
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I'm with your DW, Walt, and pay cash for anything under $20.00. After retirement, I've found that my trips to the bank for cash are less frequent because I'm not buying as many inexpensive lunches.
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Old 07-30-2009, 08:40 PM   #35
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The answer as to a methodology is found in with the McDonald's example.
McDonald's computer identifies those bills paid with cash and those paid with cc. (payment method is usually noted on receipts also)

"They also discovered that the average McDonalds transaction increased from $4.50 to $7.00."
I believe charges are larger on average than cash transactions, totally. But I think we're trying to draw bad conclusions with the data.

My point is that they don't seem to have any way to know how many of these charges were someone buying for the whole group and then being reimbursed.

If I and a friend to to McD's and we each spend $5, we have two choices:

* 2 separate transactions of $5
* 1 credit card transaction of $10, with the person paying being reimbursed $5 cash by the other party

This is not at all uncommon when groups dine out together. It's fairly common in group dining situations I've seen where one person puts it all on their card and the others, who would have paid cash, reimburse the person making the charge instead of ringing it up separately.

But it skews the data such that credit card transactions are larger! That is true, but any attempt to use that as a way to say that people spend more with a CC is bogus, because either way, I've spent $5. It's just that their data reflects a $10 charge instead of a $5 charge.

And again: It doesn't seem to take into account the fact that someone spending $5 is less likely to use the card as someone spending $20, even if the choice of payment option had nothing to do with how much they spent. Again, the tail is wagging the dog.

Do people buy more because they are going to charge it, OR do they put it on a credit card because they've bought more?

If the latter to a significant degree, again, the study is useless. It seems to be drawing conclusions it wants to reach by using faulty premises and the assumption that correlation *is* causation. There are way too many variables these studies aren't accounting for, and unless you account for them adequately using the accepted scientific method, the study is meaningless. It's entirely possible that these conclusions would still hold (to a lesser degree, I suspect) if they adequately accounted for all these variables, but until they do that (to the point where correlation likely would be proof of causation), it's junk science.
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Old 07-30-2009, 08:41 PM   #36
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One reason I charge everything is that I hate carrying change.
Easy solution to the coin change problem - just put it into one of those donation cans sitting there for animal shelters, sick kids, Little League teams or whatever needy cause is being sponsored. Good deed done for the day.
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Old 07-30-2009, 09:13 PM   #37
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I just have to decide if I will use my sacred cash in my wallet for little purchases (under $30). Most times I decide not to - which has been a weird little perk for my financial pleasure! Using cash is not a positive thing in my mental budgeting, since I do not earn FF miles for these. CC is paid off on paydays, and I roll no balance over. Even my rent in Norfolk was paid for on my CC (racked up a ton of miles over the last 12 mos) Once I get to two ticket's worth of miles, I switch all my accounts to the next CC (cell phone, EZ Pass, etc) It still pisses me off my insurance cannot be applied to a CC and has to come out of my checking account, and my NJ landlord does not take CC either! LOL You know what, that is the worst of my problems, so all is well!

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Old 07-30-2009, 09:17 PM   #38
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Originally Posted by ziggy29 View Post
I believe charges are larger on average than cash transactions, totally. But I think we're trying to draw bad conclusions with the data.

My point is that they don't seem to have any way to know how many of these charges were someone buying for the whole group and then being reimbursed.

If I and a friend to to McD's and we each spend $5, we have two choices:

* 2 separate transactions of $5
* 1 credit card transaction of $10, with the person paying being reimbursed $5 cash by the other party

This is not at all uncommon when groups dine out together. It's fairly common in group dining situations I've seen where one person puts it all on their card and the others, who would have paid cash, reimburse the person making the charge instead of ringing it up separately.

But it skews the data such that credit card transactions are larger! That is true, but any attempt to use that as a way to say that people spend more with a CC is bogus, because either way, I've spent $5. It's just that their data reflects a $10 charge instead of a $5 charge.

And again: It doesn't seem to take into account the fact that someone spending $5 is less likely to use the card as someone spending $20, even if the choice of payment option had nothing to do with how much they spent. Again, the tail is wagging the dog.

Do people buy more because they are going to charge it, OR do they put it on a credit card because they've bought more?

If the latter to a significant degree, again, the study is useless. It seems to be drawing conclusions it wants to reach by using faulty premises and the assumption that correlation *is* causation. There are way too many variables these studies aren't accounting for, and unless you account for them adequately using the accepted scientific method, the study is meaningless. It's entirely possible that these conclusions would still hold (to a lesser degree, I suspect) if they adequately accounted for all these variables, but until they do that (to the point where correlation likely would be proof of causation), it's junk science.
For the examples you give the question is: Are they statistically significant? Due to the size of the cc market I would answer no. The joint paying applies to restaurants but not to many other transactions.

As to the spending level ... with the information stored in a computer the information can be analyzed - for example, various levels of spending e.g.transactions greater than $X., again cash vs cc to analyze the spending pattern.

I do think that generally people do spend more with a credit card than with cash because a cc is not perceived the same way cash is.

Interesting info at the following link leads me to think we have a way to go to the cashless society and that the recession may be delaying it.

Credit card statistics, industry facts, debt statistics


"More than 23 billion credit cards transactions were processed in the United States in 2007, and they are projected to grow by 26 percent over the next five years."
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Old 07-31-2009, 02:39 AM   #39
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I use cash pretty often. In a bar, a nice looking $10 bill tucked under the ashtray is worth more to the waitress than some unknown BS on a CC slip.

I like the feel and look of money too.

Or, for a more modern take on the topic-




Ha
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Old 07-31-2009, 06:25 AM   #40
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I almost always carry a couple of hundred dollars for emergencies even though I pay for most things with a credit card which I pay off every month. I tip in cash as I have heard that the recipients prefer this. I pay for small purchases in cash when it seems odd(to me) to use a cc for some trifling amount. I also pay in cash at farmers markets, the movies, etc. The credit card statement is quite a shocker to me in some ways. I spend a damn lot of money at the grocery stores, gas stations, bookstore and TJ Maxx/Marshalls. According to the statements, this is all I do with my life. Oh, and the once a month charge to the gym.
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