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Old 06-23-2017, 08:51 PM   #21
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I've never understood the argument for paying cash for everything. I understand that if you don't pay your bill in full every month it can get you in trouble, so I guess if you're the type of person who might get in trouble it's probably good advice.

But for the generally LBYM crowd here, is this really a problem? I'm 50 years old and have never paid a cent of credit card interest in my entire life. But every purchase I make gets me 2-4% back, extended warranty, and protection from the merchant in case of fraud. So unless you're just irresponsible with your money, what's the deal with advocating for paying cash for everything?

I hear Dave Ramsey say this to his audience and I just cringe every time I hear it. Why assume everyone is irresponsible with their money?
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Old 06-23-2017, 08:57 PM   #22
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I'm a churner. I think I opened and closed almost 10-20 credit cards. Can't keep track of them. American Express and Citibank didn't blacklist me, only Chase and their 5/24 rules. Heh Heh, but next year I will pass the 24 months. I might apply something with Chase then.
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Old 06-23-2017, 10:08 PM   #23
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I used to do the credit card bonus sign up offers but I haven't done one in a while. We are using mostly cash these days as DH prefers it and it's the only way to get him to participate in household finances.

I also used to do bank account promo offers. Some of these were so easy and then after the promo period I would close the account.

One thing to remember when doing promo offers. Credit card promo offers are usually credit card points or a statement credit and these are not taxable. In my experience a bank account bonus is called interest and results in a 1099 and is taxable income. Keep that in mind if you are being careful about taxable income coming close to the Obamacare cutoff or some other taxable income limit.
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Old 06-23-2017, 10:33 PM   #24
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I want to expand/clarify another response you received - -
"Q1B. Not really. Stopping using the AMEX will not adversely affect your score. Canceling the card will not affect your score for a number of years until it completely drops off (5 or 7 years, I think). Most people who do this kind of stuff as a hobby will "sock drawer" the card - meaning they will just put the card away in a drawer and not cancel it but also not use it."

Cancelling a credit card WILL adversely affect your score. One of the attribute variables that most scoring algorithms use is your credit utilization. If you had 2 cards each with $5000 limits and you had monthly charges of say $100 in total on one or both of the cards your utilization rate is $100/$10000 or 1%. If you cancel one of the cards your available credit drops and the $100 in monthly charges is now $100/$5000 or 2%. If there's no annual fee your score will be better if you "sock drawer" the credit card you don't really need. I myself have numerous credit cards where any that are in use are paid in full each month. Since I have many the impact of one credit card on my scoring is minimal and in general I will not pay annual fees (AF) to keep a credit card. With that said I do have one exception the Chase IHG card where my $49 AF gets me a free night each year which is well worth it, especially when I use it at the Intercontinental on Times Square in NY.
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Old 06-23-2017, 11:02 PM   #25
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FireFool is correct with respect to the comments about utilization. I was only thinking in terms of account age and number of open accounts.
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Old 06-24-2017, 07:24 AM   #26
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I just yesterday got a 100,000 point offer from American Express Platinum. $550 fee, with $200 rebate on airfare (but I'd probably use my Chase points for airfare until they run out), and up to $200 on Uber (which I've never used). Have to spend $5000 over 3 months which may be a bit tougher as not everyone takes AmEx due to the higher fees. Not sure about this one.
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Old 06-24-2017, 07:38 AM   #27
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Addressing a few points here:

1. I think Dave Ramsey's "don't use credit cards" approach is great for people trying to dig themselves out of debt and learning to LBYM. Most of the people here aren't in that place but I can see why some like cash.

2. I suppose I should get off my duff and churn cards but I like my Fidelity 2% cash back on everything card. It's simple. I also keep a Marriott Visa because it's got a long history and I find hotel points far easier to redeem where and when I want than airline miles.

3. Reluctant to get an Amex card- some merchants, especially smaller ones, don't take it or don't like to take it because Amex rakes off a high %.

4. From what I know of the credit score algorithms. it CAN hurt your score if you have too many open cards (they look at how much debt you could run up if you maxed them all out) and it helps to have at least one card with a long history. When I'm done with a card I actually close it out by contacting the company.
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Old 06-24-2017, 08:52 AM   #28
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Originally Posted by Blue Collar Guy View Post
I think for people who live from paycheck-to-paycheck that overspending if using a CC vs cash might be true, but it is definitely not true for those who LBYM.

We use a CC for most of our purchases but only for convenience (not having to carry as much cash) and the 2% cash back and other benefits like price rewind, extended warranty, better protections than cash or debit cards, etc. It is all stuff that we would buy anyway... since we are on auto-pay and pay in full every month in our mind when we put the item in the shopping backet is it the same as if we we paying in cash.

Same for DS and DD, they use credit cards for convenience and benefits but pay in full every month on auto-pay and LBYM so I'm skeptical of the 14-18% more claim.
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Old 06-24-2017, 09:07 AM   #29
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In my mind, we (LBYMers) are a somewhat unique crowd when it comes to financial discipline and credit cards.

So very many people struggle with credit cards, much like I struggle with a plate of brownies in front of me. I have friends who have no problem ignoring dessert trays. Not me.

Those same friends, however, measure their ability to buy things by the remaining limit on their credit cards. It is a terrible, terrible way to live, paying monthly minimums. To them, a purchase just affected the monthly minimum payment. They didn't see the bigger picture.

I don't agree with Ramsey on many things, but for these folks, I recommended a recent local seminar using his program. They got a lot out of it, more than I could ever get through to them.
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Old 06-24-2017, 09:08 AM   #30
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Originally Posted by pb4uski View Post
I think for people who live from paycheck-to-paycheck that overspending if using a CC vs cash might be true, but it is definitely not true for those who LBYM.

We use a CC for most of our purchases but only for convenience (not having to carry as much cash) and the 2% cash back and other benefits like price rewind, extended warranty, better protections than cash or debit cards, etc. It is all stuff that we would buy anyway... since we are on auto-pay and pay in full every month in our mind when we put the item in the shopping backet is it the same as if we we paying in cash.

Same for DS and DD, they use credit cards for convenience and benefits but pay in full every month on auto-pay and LBYM so I'm skeptical of the 14-18% more claim.
Its always pleasant to hear both sides of a situation. It is very possible the majority on this forum doesnt overspend when using plastic, I for one find it more painful to use cash , as for being skeptical,
Here is one study its shows 20%, Because of these two reasons, people overspend when using credit cards. In one study, the authors found that participants were willing to spend $175 to throw a Thanksgiving party when using a credit card to buy the food, but only $145 when using cash. These findings have been replicated by others.https://www.psychologytoday.com/blog...or-credit-card
Im just putting it out there, I for 1 believe you spend more using a credit card.
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Old 06-24-2017, 09:36 AM   #31
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Originally Posted by Blue Collar Guy View Post
... I for 1 believe you spend more using a credit card.
You obviously don't have a good grasp of just how financially responsible members of this forum are.
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Old 06-24-2017, 09:36 AM   #32
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I am getting skeptical of points/miles cards. From what I have seen the point can be easily devalued overnight. A few years ago I got an airline card that gave me 60,000 miles. Great! I had two trips planned and both were 25,000 points. 10,000 points to spare!! Except that a few months later the airline raised the points for these trips to 32,000. Due to the spending I had done to earn the points I had enough, but the lesson was learned.

Now, I use mainly cash back cards. When I get the cash or use it to pay a bill, I take that amount and put it into a special savings account. They can't devalue the cash in my savings account, that's the gubmint's job. I mainly use this account to pay for extras for my family or when traveling.
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Old 06-24-2017, 09:41 AM   #33
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Yep - cash back here too. I only use mileage cards for the other perks like free checked luggage and primary car rental insurance.
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Old 06-24-2017, 09:41 AM   #34
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You obviously don't have a good grasp of just how financially responsible members of this forum are.
LOL, no i do. Im the exception i guess. I spend more using plastic, I know i do. Im the type "ah lets just get it." Or if im at the auto mechanic for an oil change special (21.99)and he starts with the "you know you really need to change the cabin air filter", If i only went with the 25 bucks for the oil change i wouldnt let him soak me for the overpriced air filter. But i have the plastic so i let him do it, and throw it on the card. Instead of going to the auto supply place, paying cash and doing it myself for half the price.
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Old 06-24-2017, 11:06 AM   #35
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I remember hating to have to write checks at the grocery store, and was thrilled when they started accepting credit cards, and now I get cash back rewards on my grocery shopping!
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Old 06-24-2017, 12:00 PM   #36
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Unless there is a transaction fee levied for using a credit card, all purchases and monthly payments are charged to a 2% cash back single credit card that is set up to automatically debit the full amount of the monthly bill from the checking account. Quicken downloads all of these transactions for categorization and spending tracking.
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Old 06-24-2017, 12:25 PM   #37
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LOL, no i do. Im the exception i guess. I spend more using plastic, I know i do. Im the type "ah lets just get it." Or if im at the auto mechanic for an oil change special (21.99)and he starts with the "you know you really need to change the cabin air filter", If i only went with the 25 bucks for the oil change i wouldnt let him soak me for the overpriced air filter. But i have the plastic so i let him do it, and throw it on the card. Instead of going to the auto supply place, paying cash and doing it myself for half the price.
I agree with BCG here. (Which is unusual, for the record.)

I have been LBYM, use Quicken, have extensive experience with credit cards, budgeting, and tracking money. I am one of the most boringly responsible and self-aware people I know.

The (well my) claim is not that people on this board overspend. It is not that they are not LBYM. It is not that they can't afford it. It is not that they do not buy stuff that they don't need. It is simply that they spend a little more using credit cards than they do with cash/checks.

More than 50% of us here are above average, though, I know :-). To those of us who are convinced we are right, I always suggest a test: Stop using credit cards for a few months and see what happens. Even though I know that I am one of the favored Wobegonites and absolutely don't spend more using a credit card than with a debit card, every time I switch back to my debit card, my spending decreases. Every time I switch to my CC, my spending increases.

It makes sense, too. The CC company gives us all these side benefits - 2% cash back or miles or points, automatic categorization, the bill float. We're not paying any interest. And it's so easy to swipe that card. And when A is easier than B, most of us - in aggregate, on balance, on average, over time - will do more of A than B. The CC companies are smart businesses; if it weren't true, they wouldn't do these things.
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Old 06-24-2017, 12:26 PM   #38
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I remember hating to have to write checks at the grocery store, and was thrilled when they started accepting credit cards, and now I get cash back rewards on my grocery shopping!
OMG, I forgot i used to cash my pay check at the grocery store. And even wrote a few checks too at the register. Pre ATM days. Pre direct deposit.
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Old 06-24-2017, 03:49 PM   #39
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Its always pleasant to hear both sides of a situation. In one study, the authors found that participants were willing to spend $175 to throw a Thanksgiving party when using a credit card to buy the food, but only $145 when using cash. These findings have been replicated by others.https://www.psychologytoday.com/blog...or-credit-card
Im just putting it out there, I for 1 believe you spend more using a credit card.
Interesting article.
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Old 06-24-2017, 04:32 PM   #40
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I agree with BCG here. (Which is unusual, for the record.)

I have been LBYM, use Quicken, have extensive experience with credit cards, budgeting, and tracking money. I am one of the most boringly responsible and self-aware people I know.

The (well my) claim is not that people on this board overspend. It is not that they are not LBYM. It is not that they can't afford it. It is not that they do not buy stuff that they don't need. It is simply that they spend a little more using credit cards than they do with cash/checks.

More than 50% of us here are above average, though, I know :-). To those of us who are convinced we are right, I always suggest a test: Stop using credit cards for a few months and see what happens. Even though I know that I am one of the favored Wobegonites and absolutely don't spend more using a credit card than with a debit card, every time I switch back to my debit card, my spending decreases. Every time I switch to my CC, my spending increases.

It makes sense, too. The CC company gives us all these side benefits - 2% cash back or miles or points, automatic categorization, the bill float. We're not paying any interest. And it's so easy to swipe that card. And when A is easier than B, most of us - in aggregate, on balance, on average, over time - will do more of A than B. The CC companies are smart businesses; if it weren't true, they wouldn't do these things.
I would only experiment with not using using credit cards if I were:
a) still saving for retirement and not meeting my savings goals or
b) not staying within my annual budget.

Otherwise - what exactly is the point?

Do we save money, minimize expenses, just on principle once retired?

Personally we don't mind paying a little extra for convenience, because convenience is very valuable to us as we prefer to minimize hassles and time wasting chores, but I don't think we are actually paying extra for convenience with credit cards.
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