Credit Card Questions

[RunningBum]

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.

 

[athena53]

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.

 

[pb4uski]

Because, if you peel off a few $20's at the time of purchase, it has a greater impact on you than if you put it on the card.https://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/, https://www.nytimes.com/2016/03/27/...ending-as-the-cash-habit-fades-away.html?_r=0, https://www.psychologytoday.com/blo...it-matter-whether-you-pay-cash-or-credit-card, Why We Spend More Using Credit Versus Cash : NPR

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.

 

[JoeWras]

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.

 

[Blue Collar Guy]

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/blo...it-matter-whether-you-pay-cash-or-credit-card
Im just putting it out there, I for 1 believe you spend more using a credit card.

 

[REWahoo]

... 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.

 

[Chuckanut]

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.

 

[audreyh1]

Yep - cash back here too. I only use mileage cards for the other perks like free checked luggage and primary car rental insurance.

 

[Blue Collar Guy]

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.

 

[audreyh1]

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!

 

[CDRE]

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.

 

[SecondCor521]

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.

 

[Blue Collar Guy]

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.

 

[ownyourfuture]

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/blo...it-matter-whether-you-pay-cash-or-credit-card
Im just putting it out there, I for 1 believe you spend more using a credit card.

Interesting article.

 

[audreyh1]

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.

 

[RunningBum]

For that oil change case, what if my trusted mechanic tells me my tires are no longer safe and I should replace them? With just cash in my pocket, I say I'll think about it, and may or may not come back, before I slide off a slick snowy road like I did a couple years ago (see the car maintenance thread).


For the Thanksgiving party, am I getting something extra for the extra money? Probably. Is it overly extravagant, or do my friends groan when they see how I've cut corners?


I'm sure I do spend a bit more with a credit card nowadays. I can afford a splurge now and then, and I'm not going to deprive myself. When I was struggling to make ends meet, I was always careful even with a CC and always made sure I could pay it off each month. I think I'm in the majority that way here, and in the minority with the rest of the world.

 

[Ready]

This is the forum where people rationalize that a 2.5% WR is reasonable because the world might implode tomorrow. The last thing we need to encourage members on this forum to do is spend less. So I say if using credit cards encourages 20% more spending, fantastic!

I am curious though, for those of you who say they "pay cash", exactly what that means. Do you walk around with hundreds of dollars in your wallet? If you go to a store and want to buy something that you had not planned for, do you have to leave and find an ATM and then go back to the store?

Do you worry about losing the money, or having it stolen, or getting mugged? How frequently do you have to go to an ATM to replenish? Are you on of those annoying people who insist on writing a check in the grocery line to pay for four items? And if so, do you wait until the cashier has finished ringing everything up before you take the checkbook out of your pocketbook and look for a pen to begin filling out the check?

 

[RunningBum]

... And if so, do you wait until the cashier has finished ringing everything up before you take the checkbook out of your pocketbook and look for a pen to begin filling out the check?

LOL, big pet peeve of mine! I always want to ask if they just now realized they'd have to pay for the items?

 

[sengsational]

Whenever I see someone pay a larger ticket thing with cash nowadays, my thoughts drift, correctly or incorrectly, to wondering if they have a "cash business" and are spending out of the revenue bucket to reduce their income tax. I think it's because I know that, with a little effort, they could save at least 2%, maybe more, and not have to risk walking around with many hundreds in cash in their pocket.

 

[Blue Collar Guy]

This is the forum where people rationalize that a 2.5% WR is reasonable because the world might implode tomorrow. The last thing we need to encourage members on this forum to do is spend less. So I say if using credit cards encourages 20% more spending, fantastic!

I am curious though, for those of you who say they "pay cash", exactly what that means. Do you walk around with hundreds of dollars in your wallet? If you go to a store and want to buy something that you had not planned for, do you have to leave and find an ATM and then go back to the store?

Do you worry about losing the money, or having it stolen, or getting mugged? How frequently do you have to go to an ATM to replenish? Are you on of those annoying people who insist on writing a check in the grocery line to pay for four items? And if so, do you wait until the cashier has finished ringing everything up before you take the checkbook out of your pocketbook and look for a pen to begin filling out the check?

Yes I walk around with 100's of dollars. I went to dinner last Friday for Fathers day at a fine steak house, I had $2200 dollars in my pocket, I spent $560 including tips for valet and waiters. I haven't written a check at the grocery store since i started having money, probably around 1989. I find the person buying 1 thing and putting in a chip credit card and wait 2 minutes annoying. Mugging? Im blessed, Im a large man, Im a retired cop too. Im packing "heat" all the time, I dont worry about getting attacked by people. The muggers are weak scared social predictors that attack who they perceive are weak. Lose money you bet, i now have a wallet with a chain on it, or i might lose the entire thing. I dont go to the ATM, I have about 10k in my house, I have an alarm, cameras, locks . When the 10k goes to 5k i go to the bank. I get a free cup of coffee from the counter, and take out another 5 large. I walked around with 2 bucks in my pocket every day from 1983-1989 and i brown bagged my lunch. Starting in 1989 i graduated to never leaving the house without 5 bucks, i still brown bagged it. At the end of my career i walked around with probably 30 bucks and the brown bag lunch. I waited to live like this,now I am living my dream.

 

[Ready]

Yes I walk around with 100's of dollars. I went to dinner last Friday for Fathers day at a fine steak house, I had $2200 dollars in my pocket, I spent $560 including tips for valet and waiters. I haven't written a check at the grocery store since i started having money, probably around 1989. I find the person buying 1 thing and putting in a chip credit card and wait 2 minutes annoying. Mugging? Im blessed, Im a large man, Im a retired cop too. Im packing "heat" all the time, I dont worry about getting attacked by people. The muggers are weak scared social predictors that attack who they perceive are weak. Lose money you bet, i now have a wallet with a chain on it, or i might lose the entire thing. I dont go to the ATM, I have about 10k in my house, I have an alarm, cameras, locks . When the 10k goes to 5k i go to the bank. I get a free cup of coffee from the counter, and take out another 5 large. I walked around with 2 bucks in my pocket every day from 1983-1989 and i brown bagged my lunch. Starting in 1989 i graduated to never leaving the house without 5 bucks, i still brown bagged it. At the end of my career i walked around with probably 30 bucks and the brown bag lunch. I waited to live like this,now I am living my dream.

For all of the large, gun carrying ex-cops on the forum, this may work just fine. For the rest of us, I would not be comfortable carrying $2,200 around in my wallet.

 

[mystang52]

I have a Chase Sapphire card, and recently took advantage of Chase AARP card offer. I was surprised I was approved because of that Sapphire card. I'd do a heckuva lot more "churning" to get the free money incentives, but DW won't let me.
My primary card is AMEX Blue Preferred. I use that AARP card for restaurants as the rebate is better. Between AMEX and Chase AARP I charge virtually everything I buy. As soon as statement cycle ends, I schedule the payment near the payment due date. It takes a minute to do this, no 14% (or whatever) interest and the rebates add up quickly and significantly.

 

[Blue Collar Guy]

For all of the large, gun carrying ex-cops on the forum, this may work just fine. For the rest of us, I would not be comfortable carrying $2,200 around in my wallet.

Very valid point., But this is how I live my life. I was just commenting on my world and the credit card issue.

 

[Ready]

Very valid point.

But more importantly, did you spend 20% less at the restaurant because you were paying with cash?

 

[RunningBum]

For all of the large, gun carrying ex-cops on the forum, this may work just fine. For the rest of us, I would not be comfortable carrying $2,200 around in my wallet.

Yeah, and that plan works until it doesn't.