I’ve decided to start a new campaign. I call it “Paper or Plastic”. Let me explain.
Plastic = credit. You know what this is. 18% interest (or worse).
Paper = cash. We all know what this is. Greenbacks.
I believe you should always use paper. ALWAYS. Sure, there are a few people out there that have the self discipline and knowledge to use credit to their advantage (Jonathon), but for everyone else, you should strive to use paper. Here’s a short list of things:
Groceries: paper
Gas: paper
Entertainment: paper
Eating out: paper
Mortgage: plastic
Everything else: paper
Okay. That pretty much covers it. In my humble opinion, the only thing you should EVER finance or carry debt on is your home. When I say home, I don’t mean, home equity lines of credit to buy consumer goods, I mean, just mortgage payments.
If you need further incentive to use paper instead of plastic, consider this. If you’ve been using plastic (and not paying it off at the end of the month), you are paying more for everything you buy. How much more? Depends on what interest rate you are paying on that debt and how long you carry the debt. But, if you have been on the roller coaster of credit card debt and then get off of it, you instantly give yourself a discount on everything you buy. If you were paying 18% interest on your credit card, it’s like you’ve suddenly been given an 18% off discount on EVERYTHING you buy. Now that’s a deal!
So, when you buy something, pay with paper, and take it away in plastic!
Plastic good is good use on basic purchase because of the cash back you get from the cards. If you can pay the amount in full, use credit card to get some cash back. The cards do give 1 to 5% cash back. People should take advantage of this if they do not have debt and can control their spending so that they pay off the card every month.
I would normally agree completely, but I personally chose to go with the AmEx instead of regular plastic. First, I get points. Second, it acts like cash once the bill comes due (pay in full, so I never charge what I don’t/won’t be able to afford). Third, the due date is a solid month after the closing, so I can arbitrage the payments nicely. By transferring funds around the savings accounts (and carrying a small yield on my checking, which I can do since my balances are generally mid 4 figures or better), I can simply yet effectively earn float w/o sweating the Check 21 clearance times. And since I use online bill pay, I’m always on time. This has worked out decently for me so far.
I see your point and don’t disagree but I do think it’s an individual choice. I use the citi dividends card for everything i used to pay cash or check for and I reap the cash rewards every couple of months. But I *do* pay off the CC in full EVERY month. And not only do i get a little something back, but I have a record of every single purchase inside of quicken from downloading my transaction logs.
If someone can’t (financially or organizationally) pay off all CC balances each and every month, then I say go with paper 100%!
my husband and I chose for the kind of credit card where you pay at the end of the month exactly what you owed, no interest. That way you have the advantage of using plastic, without the disadvantage of high interest rate.