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Interesting viewpoint on credit cards
01-13-2018, 04:19 PM
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#1
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,290
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Interesting viewpoint on credit cards
Like most (all?) people on the forum we use credit cards extensively since this being the 21st century it'd be kind of hard to get along without them, but we pay them off in full every month so we don't pay cc interest. Last night I stumbled across this Dave Ramsey rant (he calls it that himself) that even if you pay off the cc every month you'll still spend more than if you pay cash. I'm not so sure, in part because we are very much aware of how much we spend and on what because we track it carefully in spreadsheets and Quicken.
Ramsey holds that if you have to lay down $100 bills at the grocery store your brain says "Ouch!" and that will make you spend less. He maintains that the same thing does not happen with plastic.
But when I use plastic I know that within a month at most my bank account is going to be drained by whatever $$ number is on the cc receipt and in my case at least, my brain still says "Ouch!"
What say you?
The video is only 6:37 so not too long.
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01-13-2018, 04:26 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,000
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Walt, I think Dave may be correct with respect to his audience. Those of us on this forum are a far cry from the typical folks he's trying to reach, so I'm in the same "ouch" boat as you. No matter what means you use to spend it, the money comes out of your account just the same.
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Numbers is hard
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01-13-2018, 04:28 PM
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#3
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,155
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with an estimated net worth of $55 million or so, do you think Dave always follows his own advice?
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I thought growing old would take longer.
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01-13-2018, 04:29 PM
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#4
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Administrator
Join Date: Apr 2006
Posts: 22,923
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I really don't know much about Dave Ramsey, but I get the impression that his target audience are the people who ate the marshmallow before the researcher came back.
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Living an analog life in the Digital Age.
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01-13-2018, 04:36 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Apr 2005
Location: Midwest
Posts: 2,960
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Quote:
Originally Posted by REWahoo
Walt, I think Dave may be correct with respect to his audience. Those of us on this forum are a far cry from the typical folks he's trying to reach, so I'm in the same "ouch" boat as you. No matter what means you use to spend it, the money comes out of your account just the same.
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Exactly! When people say things like: If you have to lay down $100 bills at the grocery store .....
I ask: Who's "you"? Not me, that's for sure. And on a practical note, if you start flinging Benjamin's at a supermarket they might call the police.
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01-13-2018, 04:40 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jun 2004
Location: Diablo Valley (SF Bay Area)
Posts: 2,704
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His line: "back in the 30s or 40s you learned to trade for something." I wasn't alive in the 30s or the 40s so my mindset was always different. Maybe that's why I don't relate to what he preaches. Like he says when he started doing the show fast food didn't take plastic! I pay Starbucks with the app, how do you classify that?
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01-13-2018, 04:45 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Coronado
Posts: 3,655
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I am not a Dave Ramsey fan at all, but in this case, his contention is backed up by some solid research. For example: http://www.dffrntwrld.com/wp-content.../xap143213.pdf
Monopoly Money: The Effect of Payment Coupling and Form on
Spending Behavior
Priya Raghubir
New York University
Joydeep Srivastava
University of Maryland, College Park
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01-13-2018, 04:56 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,204
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I'm not a Dave Ramsey fan... and I think in our case he is totally wrong since we have been living like this... using credit cards and paying the bill in full each month.... for over 25 years.
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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01-13-2018, 04:56 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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I don't think benji's or plastic makes any difference. And even if it did that's a good thing.
Because it helps me Blow More Dough -
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01-13-2018, 04:59 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,806
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Quote:
Originally Posted by cathy63
I am not a Dave Ramsey fan at all, but in this case, his contention is backed up by some solid research. For example: http://www.dffrntwrld.com/wp-content.../xap143213.pdf
Monopoly Money: The Effect of Payment Coupling and Form on
Spending Behavior
Priya Raghubir
New York University
Joydeep Srivastava
University of Maryland, College Park
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That may be, but my beef with Ramsey is, rather than explaining this to his audience, and explaining that if you learn to overcome this, you will be helping yourself, he just tells them "Don't use CCs!". If you learn, then instead of spending more, you'll spend just what you decided to, and you will get 2%-4% rewards.
I've seen some of his videos, I may have discussed them here, but I definitely did, in length, on another forum with a DR fan. I think in this video, he says some really silly things, something like "I've never had a rich man tell me the reason he is rich is due to CC rewards". Well that's just silly. Just because something didn't "make you rich" doesn't mean you shouldn't do it. It all adds up.
Another way to say this is - if you want to do better than the average person, you are going to have to do something different from the average person. So forget about if the average person spends more with a CC, learn to control your spending.
Separate from that, I actually don't 'get' why turning over cash makes a difference. I would think, once I've got the cash in hand, I'm thinking - hey, spend this! But with a CC, I know I can't just do that endlessly, so I need to think about each and every purchase, and whether it is of value to me.
-ERD50
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01-13-2018, 05:00 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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Quote:
Originally Posted by razztazz
Exactly! When people say things like: If you have to lay down $100 bills at the grocery store .....
I ask: Who's "you"? Not me, that's for sure. And on a practical note, if you start flinging Benjamin's at a supermarket they might call the police.
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Not around here. I see a lot of Benjamins handed out at stores. Big cash economy I suppose.
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Retired since summer 1999.
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01-13-2018, 05:11 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Apr 2005
Location: Midwest
Posts: 2,960
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Quote:
Originally Posted by audreyh1
Not around here. I see a lot of Benjamins handed out at stores. Big cash economy I suppose.
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I covered that
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01-13-2018, 05:13 PM
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#13
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Recycles dryer sheets
Join Date: Oct 2017
Posts: 120
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I was between "paycheck jobs" for a year plus, and had always been a big credit card user for all the reasons noted, before, and after. But I used the "pay with cash" plan during this period without a paycheck so to feel the expenditures more. I felt the grocery purchases, for example. And I bought zero clothing, no fun stuff, just necessities, as a way to not "over spend", which while I had no paycheck, it felt like any purchase was "over spend".
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01-13-2018, 05:17 PM
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#14
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Full time employment: Posting here.
Join Date: May 2014
Posts: 977
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We buy using credit cards to the maximum extent to get the 2% cash back. And we pay entire balance each month, no credit interest fees. The amount we spend is what we spend regardless of cash vs credit.
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01-13-2018, 05:22 PM
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#15
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Thinks s/he gets paid by the post
Join Date: Mar 2008
Location: Atlanta Suburb
Posts: 1,499
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Quote:
Originally Posted by REWahoo
Walt, I think Dave may be correct with respect to his audience. Those of us on this forum are a far cry from the typical folks he's trying to reach, so I'm in the same "ouch" boat as you. No matter what means you use to spend it, the money comes out of your account just the same.
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+1 I think on a generic basis his audience needs his CC advice. I am generalizing, but typically they seem to be folks that do not manage money well and have a lot of consumer debt. Hopefully he will convert them to LBYM folks and they will FIRE and join the forum.
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"Oh, twice as much ain't twice as good
And can't sustain like one half could
It's wanting more that's gonna send me to my knees" - John Mayer
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01-13-2018, 05:23 PM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 37,931
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We spend under budget already, so even if we splurge more than we might otherwise with cash it doesn’t matter. If we don’t spend it, our heirs will. What are we saving it for? We already “save” too much.
Dave Ramsey is targeting unretired folks who are savings challenged.
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Retired since summer 1999.
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01-13-2018, 05:24 PM
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#17
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Moderator
Join Date: Oct 2010
Posts: 10,622
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I think I'd heard of this guy before, but wasn't sure. Seems like kind of a trollish position to take. A "click bait" kind of topic. But I'll comment that it's two separate things: easing the transaction and weighing the value of the trade.
There's probably been a time where, whether you were going to pay with cash or whether you were going to pay with a credit card, you saw friction in doing the transaction and opted out of doing the transaction. It happened to me yesterday. A going out of business sale, I picked up a $10 item and was going to get it for $5, but the lines at the cash registers were long. Not worth it. I left without buying. Too much friction.
Certainly removing friction (Disney knows you'll have your room key on you, whereas you probably won't have cash, and same with the cruise lines) is a smart move for the business. I wouldn't argue against that. But that's all about making it real easy to execute the transaction. The other thing is the value of the trade. It's separate. Or at least it's separate in my mind.
If I'm at Disney and I want an ice cream cone (or more my style, I'm on a cruise and I want a beer), I weigh the value of the trade. I cringe when I think I can buy an entire six pack of good beer for what I'm about to pay for this horse p** that they call "beer" on a cruise ship.
Sometimes I wish I could turn that "off" when I'm traveling, and just enjoy myself.
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01-13-2018, 05:25 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Posts: 12,566
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I've been hearing this all my life, since I first became aware of credit cards in my late teens. It is similar to "the more items on the buffet, the more total food you will eat." Probably true, if you're not a mindful eater, or spender.
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If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success – to be able to spend your life in your own way.’ Christopher Morley.
Even a blind clock finds an acorn twice a day.
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01-13-2018, 05:25 PM
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#19
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Recycles dryer sheets
Join Date: Dec 2017
Posts: 244
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I can see myself saving more by paying with cash. For example if I had a credit card in my wallet with 1k limit or 1k in cash that I would make the cash last longer as I see it leaving me as appose to a credit card and not paying attention as to how much I am spending.
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01-13-2018, 05:26 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Mar 2008
Location: Atlanta Suburb
Posts: 1,499
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__________________
"Oh, twice as much ain't twice as good
And can't sustain like one half could
It's wanting more that's gonna send me to my knees" - John Mayer
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