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Interesting viewpoint on credit cards
Old 01-13-2018, 05:19 PM   #1
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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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Old 01-13-2018, 05:26 PM   #2
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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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Old 01-13-2018, 05:28 PM   #3
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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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Old 01-13-2018, 05:29 PM   #4
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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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Old 01-13-2018, 05:36 PM   #5
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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.
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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Old 01-13-2018, 05:40 PM   #6
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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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Old 01-13-2018, 05:45 PM   #7
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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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Old 01-13-2018, 05:56 PM   #8
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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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Old 01-13-2018, 05:56 PM   #9
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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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Old 01-13-2018, 05:59 PM   #10
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Originally Posted by cathy63 View Post
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
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.

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Old 01-13-2018, 06:00 PM   #11
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Originally Posted by razztazz View Post
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.
Not around here. I see a lot of Benjamins handed out at stores. Big cash economy I suppose.
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Old 01-13-2018, 06:11 PM   #12
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Not around here. I see a lot of Benjamins handed out at stores. Big cash economy I suppose.
I covered that
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Old 01-13-2018, 06:13 PM   #13
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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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Old 01-13-2018, 06:17 PM   #14
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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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Old 01-13-2018, 06:22 PM   #15
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Originally Posted by REWahoo View Post
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.
+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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Old 01-13-2018, 06:23 PM   #16
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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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Old 01-13-2018, 06:24 PM   #17
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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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Old 01-13-2018, 06:25 PM   #18
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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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Old 01-13-2018, 06:25 PM   #19
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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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Old 01-13-2018, 06:26 PM   #20
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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.
LOL!
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