Reader Comments/ Credit vs. Cash

So far, I know I have three readers. Here are some comments they made privately to me (thanks family).

From big brother (mine, not Big Brother): I disagree with your pay cash whenever possible theory. In fact, I say pay credit card whenever possible. Cash disappears without a trace, credit card bills provide a record of every penny you spend on them. If you want to know where your money goes or what you can cut back on, study that credit card bill. Even better import into Quicken and create reports.

Also credit cards give you interest free short term loans (I haven't carried an interest bearing balance since 1994).

From little sister: That works for very disciplined people, but unfortunately, not everyone uses credit cards that way. In fact, most people don’t. They run balances and for those people, they need to stop using credit and pay cash. If the bill is too high and you can’t pay it at once and you don’t have enough cushion in your account, you may not be able to pay it off. Then you’ve got a partial balance and the next month, it gets bigger.

I’m not saying Susan is one of those people, but I think the risk is greater for many Americans of carrying a balance. I do know that Susan is very careful with her cash and accounts for expenditures more carefully than the average person, but I do agree that having a credit card show you where you spent your money is helpful. In fact, some credit cards categorize things for you on a quarterly basis. X was spent on gas, Y was spent at grocery stores, etc. I think her blog is intended to reach people who have trouble managing their finances. If you haven’t carried a balance in 15 years, you aren’t in the same boat as most people and your finances are well-managed.

If I go to the grocery with $100 in cash and can’t spend more than that, I won’t. I’ll put things back. If I put it on a credit card, I can tell myself it’s okay to go over by $7—that’s the way Americans tend to think. We are caught in a terrible cycle of spend, spend, spend.

You are both right, though little sister is more right to my mind. Here's why. If I spend $200 at Walmart, that credit card statement doesn't tell me if it is for groceries, cleaning supplies, home repair, towels, gardening or whatever. Thus, those summary statements some companies put out are kind of useless to me as I make a lot of purchases in one stop shopping places like Walgreens where medicine, gifts, and candy bars are lumped together. I guess if I had a lot of time to kill I could break it down like big bro suggests.

Also, I agree that overspending is a real problem with cards. I've done it with cash, too, but not as badly. Now some credit cards offer cash incentives, frequent flier miles, or discounts. That sounds good if you are using the cards anyway and paying off balances each month. But, some of the rewards programs are a little too complicated for me or encourage you to spend even more (eg. Target). So, I just stick with two major cards that have treated me well (not Capital One or Discover).

Little sis brings up the point of preaching to the choir. I think I need to reach a new readership but have hesitated to invite more people to my blog. I will think about it now.