Saturday, April 16, 2016

Going Retro With My Spending Habits: Why Cash Is Still King


Yesterday was payday, and since it's also the middle of the month that meant today was "pay the bills" day. When I looked at the balance online for this month for my credit card, though, I truly had a "yikes!" moment. I guess you could say it was sticker shock after the fact.

My bill was a few hundred dollars more than I intended it to be -- not because of anyone stealing my card, but because of my own haphazard charging on it during the past month. Normally the minimum balance it carries is only $25, with recurring charges for my monthly Sirius and Adobe Photoshop subscriptions. This time, though, using the card so freely plus previous purchases pushed it way past that amount. A dinner with my Meetup group, a lunch from my office building's cafe, lunch out with a friend, a purchase at the supermarket, an item of clothing, etc. Not to mention a lot of meat from my company that I've been buying. Seems there were a few times I was simply too lazy to go to the ATM, so I just used my credit card for the convenience. And therein lies the danger that so many Americans have been undertaking for decades now...

Just last Sunday, I had watched a two-minute long commentary on CBS Sunday Morning by Mellody Hobson on Americans' cash-less trend and obsession with charging purchases to credit cards (or using a debit card or a mobile phone to pay.) Very little of us carry cash around in our wallets today, or write out paper checks, for that matter. (You know, money...those green slips of paper your parents and grandparents used to pay for stuff.) As a result, our credit card debt has skyrocketed -- and Hobson says the average household carries $15,000 in card debt. Holy smokes! You can watch the video clip here before I continue (it wouldn't work when I tried to embed the link.)

Well, even before seeing my latest credit card bill, I had already intended to take Hobson's advice to heart: pay for everything -- or at least as much as I can -- in cash. Most of the time, I do. I've always been a saver rather than a spender. When I was ten my mother got me a savings account at our town bank. I loved saving the allowance I earned from doing chores into the account and watching it grow, along with interest, via the little book the banks used to give everyone (today, my account's records online and I don't really like it; I still miss the little books because to me it made the money feel more "real" and I could instantly see how much was in it versus calling the bank's 1-800 number and punching in my account number to get the balance.) And if there was a special toy I wanted to buy, I'd delight in saving my money until I had earned enough to pay for it.

I was in college when I got my first credit card, and then a few cards to my favorite stores. I never had a problem with overspending or overusing them, but it did amuse me how I would get rewarded with increased credit at a young age. If I weren't so dependable, I could have purchased a car with the credit amount that was given to me.

We don't live at or below our means so much anymore. We've become a nation of shopaholics. That old saying that was prevalent during the Great Depression, "Use it up, wear it out, make it do, or do without" fell by the wayside decades ago when Diner's Club and Mastercard (then Mastercharge) were introduced to the public.


I'm not villainizing credit cards, by the way. They are a wonderful thing when you need them, especially for emergency purchases if you simply don't have the money yet, or for online purchases or traveling where cash simply isn't an option. They are necessary today for building one's credit. But they can become too much of a good thing if they're used casually for too many smaller purchases that add up.

When you carry cash, as the video points out, you're more aware of how much money you're actually spending. And you're also curbing an addiction for instant gratification -- if there's something you really want and don't have enough cash for it...well, you can always wait for the next paycheck (although most people won't -- they're going to pull out their card.)

The Germans, by the way, love paying for as much as they can with cash -- even more so than other European nations. Part of their motivation is because they simply prefer not to accumulate debt. The German word schulden, which means debt, comes from the word for guilt, which is schuld. According to this article, only about a third of Germans have a credit card.

I was surprised to learn that some stores such as T.J. Maxx and Kmart still have the layaway programs that they brought back almost a decade ago, because I don't know of anyone who actually uses them. Maybe if stores gave incentives (such as points you accumulate that earn you a discount or coupon) for those that use layaway, it might entice more people to pay for something when they can afford it.

Personally, I feel more powerful and in control having some dough on me at all times. So here's what I'm doing from here on out. I'm paying off the credit card bill, obviously, and taking out only so much cash each pay period to cover gas and needed toiletry items, plus a bit more to cover any upcoming social outing, special occasions that require a purchase, and unexpected purchases. And sticking to it. I look forward to seeing only those two recurring charges for most months on my credit card again.

8 comments:

  1. I feel your pain, Pam.
    I didn't get a checking account until I was eighteen, one day before i went in the army, and only because my recruiter asked me offhand if I had one. I didn't, and he said "you better go get one, schmuck, and fast, if you ever wanna buy anything for the next three years."
    Lucky for me, there wasn't much chance to spend any of my pay for a while, basic training and all, so I had a nice little account going when I hit Germany (your post got me remembering that) in the spring of '88.
    Ah, were we ever so young?
    Apparently we were. Yeah, Deutschland was kind of a cash-and-carry place, and you would go to this little bank on post and come out with a wad of Deutschemarks and see the sights. Hey, I was a nineteen-year old soldier, and beer and girls were a priority, with culture a distant third. I won't apologize, we won the cold war! And everything's been fine since then, right? (ahem)
    I still have a little of that old kraut money, stuck in a jar.
    But yeah, ya gotta have a credit card, for emergency's, like if your car breaks down on a lonely highway at night and you gotta check into the Bates Motel.
    Great post, and a great blog, by the way, which I recently stumbled upon on during my endless, relentless quest for knowledge. I enjoy it!
    Excelsior, Pam!
    M.P.

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    1. Thanks for your comments, M.P.! Happy you're enjoying the site. Not long ago I watched a BBC special uploaded to YouTube called "Make Me A German." A British family lived there for a few months to experience the culture -- there's a lot of common sense still instilled there in average daily living compared to the U.S., and I remember they said they're big on saving as much of their income as they can and rarely use credit cards. They also prefer to rent apartments vs. buying a home, as it economically makes more sense there at the moment. Glad you got to visit the country and enjoy it at a young age.

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  2. I'm the opposite. I put everything over $10 on my credit card and pay my balance off every month. I like the cash rewards I get, and typically apply it toward my balance. I use my credit card for convenience, not as a substitute for cash or a loan which is what gets some people into trouble. I review my credit card statement each month against my receipts and the balance is typically around the same, except for months where I made a special purchase, or have a vet bill. Fiscal responsibility was ingrained in me by my parents, so I feel good about my spending practices. I know what's in my savings account and try to keep it growing. I also have 10% of my salary put into my company's profit sharing account. This is what works for me. But if limiting yourself to using cash only works, then that's great, too. Thanks, Pam!

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    1. That's great, Tammy -- whatever works best for people. For me personally I hate knowing I'm going to have to pay for the item charged at a later date; sometimes I forget the exact amount of something and the charges can add up (although I've sometimes prepaid amounts on my bill before the charge actually hits the card.) I guess it's just my mindset.

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  3. I use a credit card for most larger purchasea (usually car repairs and such) and pay off the entire balance or more each month. The interest rates on credit cards is truly awful. It's a wise person who avoids handing them all that money!

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    1. Yeah, I agree. I find the cash back that I earn pretty much covers the interest charge, so it's not like I'm gaining any extra money.

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  4. I use a credit card for most larger purchasea (usually car repairs and such) and pay off the entire balance or more each month. The interest rates on credit cards is truly awful. It's a wise person who avoids handing them all that money!

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  5. Pam, I have to strongly disagree generally with the idea of EVER using a credit card, because I've been there and suffered it. Credit card companies are, in my opinion, no matter what their name is, legalized USURERS. Americans are up to their ears in credit card debt like never before for many reasons, among which are:
    A: The average person doesn't make a living wage anymore, and people are living hand to mouth with very little, or no savings to cover contingencies. The working class makes less now per capita than it did in the 1970s! Yet, credit cards only contribute to this vicious cycle of indigence by buying one the basics to cover the gap, at 25-30% interest! Disgusting capitalist horseshit.
    B: Remember Patience? We want it now, and use the odious little pieces of plastic to gratify our desires. So, I really don't see, with human nature being what is is, and anyone being easily approved for credit, how the dependency on having credit, with the notion that one needs it to have a certain credit score, is ever going to go away. After all, this attitude is what contributed to the housing crisis of 2008 which destroyed the middle class. When you get asked at the store, paper or plastic? you're not being asked how you want your items bagged anymore, but how you will pay.
    And speaking of plastic: Are you aware that now there isn't a corner of the earth, no matter how remote, or a beach, no matter how beauteous, that isn't littered with the stuff? I have decided to eliminate as much plastic items from my life as possible, credit cards included.

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