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Old 07-31-2009, 08:00 AM   #41
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Apparently there is an interestingly wide variety to handling everyday purchases. I'm from an era when I vaguely remember when the only credit cards were gas station and department store chains, such as Sears and Wards. Central Charge morphed into Visa.

I got a Sears credit card in 1972 for the sole purpose of establishing a credit rating and didn't use it for more than a couple of shirts for years. Everything but the rent and utilities was paid in cash.

I guess it's a matter of being able to keep track of outstanding balances - we use a spreadsheet so the left hand knows what the right hand is doing and there are no surprises when the bills arrive.
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Old 07-31-2009, 09:21 AM   #42
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Originally Posted by dex View Post
If you want to ER use cash more.
I do think the studies are flawed, but more importantly, I disagree with this conclusion.

Since CCs pay rewards, using CCs for the purchases you would make anyway will *help* you get to ER (and stay there). CCs and increased spending are not related unless you let them be related.

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I used to use my debit card for everything but use only cash now because its easier to put limits on the spending. I am in my 20's and most people my age used a credit card or debit card for purchases in the past. I do see a lot more cash now than I used to.
Caoineag, my advice would be to get your head around your purchasing and investing/saving priorities. Once you do that, you will control spending better than by whether the payment method is convenient or not.

I'd say that if a person tries to control their spending through the convenience, then any nest egg they save up will be far too tempting for them, They will likely spend it on toys rather than keep it invested. But once you understand the real value of that investment, you won't be so eager to spend it, no matter how convenient or inconvenient. Then you are on the road to FI. W/o that mental attitude, you are probably just "on the wagon", poised to fall off at any moment.

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Old 07-31-2009, 09:28 AM   #43
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I do think the studies are flawed, but more importantly, I disagree with this conclusion.
The thing is, I'd like to see a study that looks only at people who pay off their balances every month. I have no doubt that there are reckless spendaholics who spend more because they rack up the plastic and because they don't have the cash, and before you know it they have $25,000 in CC debt and in serious trouble. It would be interesting to know, to what degree, these people move the needle on the results of this study.

I suspect that if you only look at people who pay in full each month, you are (on average) looking at people who are better at managing money and are less likely to succumb to the plastic trap these studies suggest -- but instead, become the masters of credit rather than its slave. And I doubt most of this group is spending 20% more because they use plastic.
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Old 07-31-2009, 11:02 AM   #44
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I think the ones that spend more when they charge are the ones that don't need plastic in the first place. Some people spend until they physically can't any more. If they had a credit card with a $1,000,000 limit, they would still max it out. Obviously limiting themselves to cash on hand will prevent them from incurring debt beyond their ability to pay.

For me, I buy the necessaries and then a limited amount of discretionary purchases. Form of payment has nothing to do with how much I spend. The effect of using cash would require me to carry around many hundreds for normal purchases. And then I could lose it, or get mugged. Or get robbed at the atm since I would be going much more often. And I lose the float on the money (two ways - the cash I hold in my wallet earns nothing, and I currently get a month and a half of float from the CC now).

Plus, I don't care that much to record every single purchase I make. The cc does that for me. And the DW would NEVER spend the effort to keep track of every tiny purchase if using cash, but since she uses the cc, it goes into our summary of purchases, if I want to put one together.

But to each their own! If one doesn't have the motivation and discipline to keep their spending to a minimum, then don't use a cc.
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Old 07-31-2009, 11:08 AM   #45
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If a person is living paycheck to paycheck, they might tend to delay gratification if paying cash only, when there just isn't enough money in the checking account. With a CC it is easy to just think "what's the difference?" and buy it now.

But I seriously doubt that many of us here are in that situation any more, even if we can remember those days pretty clearly.
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Old 07-31-2009, 04:24 PM   #46
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Statistically they found that on average you will spend 12-18% more when making a purchase with a credit card as opposed to cash.
I think that we can all agree that these figures do not apply to this group of savy spenders/investors. I can safely say that I spend no more with CC than I would if I hauled around a bunch of cash for my expenditures. Has anyone mentioned how most CC provide spending analysis tools so that you can see how much you are spending monthly, annually, every 2 years etc?
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Old 07-31-2009, 07:37 PM   #47
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Interesting that so many here are immune to this effect. This is an unexpected result to be sure.

I, personally, have observed that I spend more with a credit card and less with cash. Not that I am going to give up my credit card, ala Dave Ramsey, but it is a significant effect (for me). If I'm shopping groceries or in a drug store and I go in intending to get certain items, if I'm paying cash, I tend to buy only those items. If I'm paying by credit card, I tend to notice other bargains and pick them up "as long as I'm in here" anyway. I haven't analyzed to see if I really save any money because I would have eventually bought those things, but my per trip tab is certainly higher.

OTOH, if I'm in a restaurant (or McDonalds) I cannot imagine that I would be hungrier or order more food, just because I was paying with a credit card. Apparently individuals differ in how they react with cash.
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Old 07-31-2009, 09:07 PM   #48
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Interesting that so many here are immune to this effect. This is an unexpected result to be sure.
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I think that we can all agree that these figures do not apply to this group of savy spenders/investors.
Interesting to see such different views sequentially. Just different perspectives, probably based on different environments/ages.


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If I'm paying by credit card, I tend to notice other bargains and pick them up "as long as I'm in here" anyway. I haven't analyzed to see if I really save any money because I would have eventually bought those things, but my per trip tab is certainly higher.
Well, *if* it was really a bargain, and *if* you really would have bought it eventually, then the CC is saving you money, and helping you get to FIRE.

Since I always have two CCs with me, I don't think about it much, but here's a scenario:

A) You plan to buy item XYZ sometime in the next few months. The lowest price you've seen is $100.

B) You are out shopping for other things, and you see it for $75. But you have no CC with you, and only $50 in the wallet. You missed out on a $25 savings.

The key is whether you *really* would have bought it anyways. Like I said earlier, if you spend because you have it, rather than really value it, you are unlikely to build up a nest egg anyway. Something will always call out to you, "buy me.... buy meeeeeeee....".

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Old 07-31-2009, 11:27 PM   #49
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I very seldom use cash. I used to put just about everything on a credit card. Now, I use 2 debit cards for just about everything. If it is a large purchase, then I will generally use a credit card. I joined a credit union that pays 5.01% on your checking, but you have to jump through a few hoops each month. One of the requirements is that you have to use your debit card 12 times per month. We have 2 accounts, so I make sure that I use each debit card 12 times for a total of 24 times per month. I will go to a gas station and pump a few dollars of gas with one debit card and stop and then start over and pump a few dollars with the other debit card. I never fill up my car now, so that I can stop at the gas station, if I need to use my debit card. I also use the self-checkout lanes at grocery stores and ring up 2 different times. I make sure to get my total 24 debits each month. People probably feel sorry for me if they notice that I left after only getting $2.00 or $3.00 worth of gas.

I have a sister who usually writes checks for each store. I feel like that who process is so slow. She does not like credit cards and does not like to carry a lot of cash.
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Old 08-01-2009, 10:04 AM   #50
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DH is almost 66 and I'm 62; we charge everything. We do carry about $20 cash, but that usually lasts us all month. We've never had cc debt; we pay off the balance every month. We have Discover and get between $300 and $400 back each year.
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Old 08-01-2009, 10:34 AM   #51
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No. I hardly ever transact retail purchases in cash. Nor do many of my peers. In fact, I would bet 80% of my peers had less than $20 on them at the moment. Peers being well educated professionals in their 20's and early 30's. I don't know how many times I have heard "I don't care where we go as long as they take cards since I have no cash".

Credit cards are easy. Change is annoying. Credit cards are more accurate - less risk for incorrect change. Many times CC's are faster than counting out proper quantity of cash, then the cashier making change and counting it out to you. They also pay me 2-4% for buying stuff that I would have bought anyway. And at the end of the year, my purchases are virtually all recorded on 12 convenient monthly statements that can be sucked into excel if I want to do any analysis on my spending patterns.
In days of yore -- the 1970's to be exact -- I returned to the US after a stint in the Army and started graduate school as a Computer Science major (as an undergraduate I was a math major). I still remember one graduate seminar I attended. I don't remember who the speaker was; I only remember what he said. He was part of a government study with the following charter: Suppose you worked for the KGB in the Soviet Union and were tasked with the job of finding the best way of keeping track of the citizens of the USSR.

According to the speaker, the conclusion of the study was that the best way was to abolish cash and issue credits cards to everyone and force all merchants to use a "mechanized" credit card terminal that reported all transactions to the appropriate authorities. This seems damned close to what we have now in the US.

I'm not particularly anti-government or paranoid, but cash seems to be more virtuous than commonly supposed.
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Old 08-01-2009, 12:11 PM   #52
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He was part of a government study with the following charter: Suppose you worked for the KGB in the Soviet Union and were tasked with the job of finding the best way of keeping track of the citizens of the USSR.

According to the speaker, the conclusion of the study was that the best way was to abolish cash and issue credits cards to everyone and force all merchants to use a "mechanized" credit card terminal that reported all transactions to the appropriate authorities. This seems damned close to what we have now in the US.

I'm not particularly anti-government or paranoid, but cash seems to be more virtuous than commonly supposed.
I can hardly sleep at night, knowing that "Big Brother" might take a peek at how much I spend at Costco each month

Now, imagine "Big Brother" had a connection to a computer in homes across the nation and could conceivably monitor your every keystroke, your communications, and all this is connected by some government invention called the "internet". And some of those computers have cameras on them - right in my home! Oh My!

Sorry, I just don't get worked up about this stuff.

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Old 08-01-2009, 12:34 PM   #53
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I can hardly sleep at night, knowing that "Big Brother" might take a peek at how much I spend at Costco each month -ERD50
Costco is a really bad example to make your point. It only takes its own "branded" credit card, which I don't have. So it encourages me to either use a debit card, which I don't like to use, or *gasp* cash.
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Old 08-01-2009, 01:08 PM   #54
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Costco is a really bad example to make your point. It only takes its own "branded" credit card, which I don't have. So it encourages me to either use a debit card, which I don't like to use, or *gasp* cash.
Not true, we signed up at Costco years after we had an AMEX card, and that is the card I use there. The only "Costco" card I have is the membership ID. Not related to Costco in any way. Maybe that has changed for new sign-ups, don't know.

Not that it makes any difference, I'm sure if Big Brother is tracking CCs, it has a way to get into Costco's system

I'm sure the govt has a whole dept pondering the implications of my portable air compressor and salmon purchase What *is* that subversive up to?


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Old 08-01-2009, 01:09 PM   #55
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...
Now, imagine "Big Brother" had a connection to a computer in homes across the nation and could conceivably monitor your every keystroke, your communications, and all this is connected by some government invention called the "internet". And some of those computers have cameras on them - right in my home! Oh My!...
This is not so far-fetched. Bet most people would be surprised how much about you could tell about a person by pulling together their Internet Service Provider records, mobile phone, and credit card transactions. Didn't mention sorting through their trash.
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Old 08-01-2009, 01:31 PM   #56
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Believe me--if someone wants to find you or stick their nose in your business, it can't be that hard.
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Old 08-01-2009, 02:23 PM   #57
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This is not so far-fetched. Bet most people would be surprised how much about you could tell about a person by pulling together their Internet Service Provider records, mobile phone, and credit card transactions. Didn't mention sorting through their trash.
Despite that, nothing seems to be happening. I am not afraid.

I think this is all a bit silly. If the govt is so interested in screwing with an individual, they don't need CC transactions to do it. They will do it anyhow.

Have any of your friends "disappeared" lately, or been thrown in jail on trumped up charges? Me either.

I'm much more afraid of all the unethical govt behavior that happens in broad daylight, under the guise of "helping" us.

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Old 08-01-2009, 02:52 PM   #58
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Sorry, I didn't mean to imply that we are all being watched -- we aren't. But once someone has been declared a "person of interest" there are many information sources available.

You are right about the unethical behavior and I agree in that I am more concerned about what is happening in plain sight.

Billion used to be a big number.
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Old 08-01-2009, 05:04 PM   #59
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Not true, we signed up at Costco years after we had an AMEX card, and that is the card I use there. The only "Costco" card I have is the membership ID. Not related to Costco in any way. Maybe that has changed for new sign-ups, don't know.
That's weird. The last time that I tried to use a Visa card at Costco,the clerk said that they didn't accept Visa cards. Are you suggesting that the clerk was wrong?
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Old 08-01-2009, 05:19 PM   #60
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From Wikipedia...

Canadian and United States Costco locations only accept American Express, PIN-based debit cards (Interac in Canada), cash, and checks. Guests of members are not allowed to write checks. American Express is the only accepted credit card (in the United States and Canada) because they charge Costco very low interchange fees (a percentage of revenue from total sales made). As Costco's margins are low in comparison to other retailers[citation needed], they cannot accept the fee without raising prices. This is an unusual relationship for American Express, which typically charges higher fees to retailers than MasterCard or Visa.[citation needed]
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