More Reasons To Cut Up Your Credit Cards

The economy is slow, inflation is rising, and the price of everything seems to be higher. What will you do about it? Use your credit card to supplement the difference? I don’t think that’s the answer. The opposite is the answer. Trash your credit cards today, and you will be free from their bondage.

I’ve written about the advantages of using cash over credit cards, even when you never carry a balance on your credit cards. Here are a few more reasons that support my stance on using cash over credit. Donna Rosato from Money Magazine wrote an article in this month’s issue titled, “Life Without Plastic”. Here are some studies she refers to that support the notion that we spend more when we use plastic.

  • Researchers performing a study of supermarket shoppers found that people who use credit cards spent more than those who stuck with cash, checks, or debit cards. The average total spent on groceries with cash was $32.96 compared to $43.49 using a credit card. The average total spent on non-essential items using cash was $9.08 compared to $18.72 using a credit card.
  • Researchers held an auction for tickets to a sold-out Boston Celtics vs. Miami Heat pro basketball game. They found that people using a credit card were willing to bid up to $60.00 compared to those bidding with cash in their pockets who bid up to $28.50.
  • A survey was performed on college students existing a campus bookstore. The survey’s data found that paying cash helps you remember how much you spent. Those that paid with cash remembered how much they spent 68% of the time. Those that paid with a credit card remembered how much they spent only 35% of the time.

There is so much psychology that goes into using a credit card. Credit card companies have mastered the art of making you feel powerful when using a credit card. They name them “platinum”, “gold”, and “preferred member” cards because they want you to feel a false sense of cultural status. The evidence is there. Credit cards help you spend more money, even if you never pay interest on a card. If you want to save more money this summer, cut up your credit cards.

  • J

    Did any of the “research” you quote above account for the fact that those without credit cards spent less because they have less money to spend … with poor money management resulting in either an inability to obtain a credit card, or having only cards that are maxed out.

    You continue this crusade to show that credit cards cause irresponsibility, when it’s really irresponsibility that causes problems with credit cards.

    • Anonymous

      The idea that people without credit cards are “less responsible” is a nice banking industry bit of propaganda… the reality is that many people without credit cards (or with fewer credit cards) have higher net worths and are far stronger financially than those who have credit cards.

      Credit cards are a form of short-term debt with high interest rates. If you need or require short-term loans in order to function, you’re not managing your finances properly, period.

      Further, all the propaganda about “being responsible” by using and paying off credit cards is hilarious. Credit cards have built-in costs, including the transaction fees charged to the merchants, which increases the price of every item sold by between 3% and 10%.

      That means that even if you’re “responsible” and pay off your short-term loan every month, you’re contributing to a trend that results in a 3% to 10% interest rate being assessed on everything that’s sold. Such a HUGE fee is not “responsible” in any sense of the word.

  • author

    J, I agree with you that the lack of personal responsibility is the reason for credit card abuse, but it is my belief that credit cards are bad financial products. They have a very long track record of creating policies, fees, and exorbitant interest rates that do not help the consumer.

  • ekrabs

    Weeeell, I have to agree with J. It depends on your personal finance skills.

    However, I also agree that there are a lot of unscrupulous credit card companies out there.

    To be fair, I also think there are some decent credit card companies as well. And if you have the skills to tame it, you can have it “pay you back” in the way of mileage perks, reward points, and cash back.

    But again, it depends on your personal finance skills.