Cash, Credit Cards, Debit Cards, & Other Financial Issues

[EllenS]

I like to keep $20-$40 in cash with me, in case of emergency - our area gets bad windstorms and resultant power outage/network outages, sometimes over a wide area.  I'd hate to be stuck in an emergency when ATM's werent's working.

Other than that, I usually use debit.  Leaving the babies strapped in the car to go inside and pay for gas?  Not for me. 

[JenJay]

*snip*
Like others, I rarely use cash because it makes small impulse purchases too easy.
*snip*

I'm the total opposite. When I was using debit everywhere I was constantly thinking "it's just $2 more" while grocery shopping or "It's just $4, no biggie" as I pulled into a coffee drive-through. Now that I'm using cash I take only what I need grocery shopping and I never want to break my emergency twenty just for a cup of coffee, pack of gum, etc. I have an awesome phone app that adds up your total as you make your shopping list, including tax, and then I round up to the nearest $5 to be safe, grab my cash, and stick to the list.

[Slartibartfast]

I recently had a credit card number stolen online so I will never again store any info in an online account (it had to be either amazon, consumer reports or netflix, the only places DH's card was used) and I'll never, ever use a checking or savings debit card online. 

It was probably Amazon - they had someone steal several customers' credit card numbers a few weeks back.  They said it was only a tiny fraction of their customer base, but that's what Sony said when the Playstation database got hacked and they didn't admit it was hundreds of thousands of numbers until the charges started showing up    Although now that I search for articles about it I don't see any, so maybe I have the wrong company and it wasn't Amazon after all(?).

I hardly ever carry cash - I like being able to make computers do the money thing for me    Paychecks are deposited automatically, bills are taken out automatically, I buy almost everything on credit cards, and Quicken imports them for me so I can keep track of things.  I do almost all my banking after midnight (when I'm awake and the kids aren't), so it's nice to be able to check everything online.  I do like getting 1-5% cash back on my cards - it ends up being around $200/year in free money!  (Well, not free since the merchants have to pay a higher percentage than I get back, but it's darn nice anyway!)

[Veronica]

I think the most we'd be liable for if our debit or credit cards were stolen is $50 so I just stopped worrying about it.  I never use cash at gas stations because it's a pain to go inside with a toddler. 

In the last five years we had one credit card and one debit card compromised.  It was very easy to rectify and we didn't end up paying for any of the charges. 

[DottyG]

Years ago, my ATM card was "eaten" by the machine.  Best thing ever to happen, and I haven't had one since.

It was too easy to get $10 here and $10 there (yes, that's how long ago it was - you could still get $10 out and there were no such things as fees) - because it was such a little amount.  But it doesn't take long for those "little $10s" to add up.

I rarely keep cash with me - for the same reason others have mentioned (and the reason above).  It's too easy to spend and not really keep an eye on your spending.  A credit card can be tracked - and, if you have one like Discover, you can get a breakdown of where your money is going.  I can get a chart of how much is spent in groceries, how much in medical expenses, etc.

I can't imagine not paying a card off every month.  I was taught that, if you don't have the money to buy it when you put it on a credit card, you don't have the money to buy it period.  I've always felt that an item isn't truly "mine" until it's paid for at the end of the month.  I'm not about to give the credit card companies money in the form of interest.  I want to pay just the amount I owe and nothing more.

I've read through the thread, but I might have missed this.  If no one has mentioned it, www.creditkarma.com is a good site to find out your credit score and other facts about your credit.  It's totally free and recommended by many financial people.

[WillyNilly]

I can't imagine not paying a card off every month.  I was taught that, if you don't have the money to buy it when you put it on a credit card, you don't have the money to buy it period.  I've always felt that an item isn't truly "mine" until it's paid for at the end of the month.  I'm not about to give the credit card companies money in the form of interest.  I want to pay just the amount I owe and nothing more.

The other day my debit card stopped working (stupid issue with my name change...) so I used my credit card for various purchases.  I kept the receipts handy and when I got home I logged onto my bank and paid my balance to the penny immediately - didn't even bother to wait for the monthly bill.

[CharlieBraun]

We completely stopped using credit cards about three years ago, and use only debit.  Now that our balances are near zero on the cards, we are getting letters from the credit card companies wanting us to enjoy our credit and here's some checks to do that with.  As our cash grows, our bank tries to sell us more "products" which means....credit.  No, thank you.

We keep $1,000 in cash in our Go Bag, and $200 cash stowed in the house just in case.

We paid off our cars late last year and are determined to keep them going for at least another two years, maybe more.  We also keep our cars filled with gas at all times, trying to never fall below half-tanks.  Having been through several black-outs and severe weather events, we'e learned the value of a full gas tank.

I must say that having our special needs dog has actually & oddly helped us cut expenses.  We used to be big travelers and whenever I traveled somethere on business that was even remotely fun, my Dh would come along.  Vacations were fly-to and stay-happy.  With our doggy, our travel is limited to places we can drive to and accommodations that permit large dogs.  Money we've saved there has gone a long way and when he needed his knee replacement surgery, we had the cash to do it.  Yes, our dog has a titanium knee now.

[oceanus]

I usually keep about $50 cash at home. Maybe $20 in my wallet.  I’m not comfortable carrying or keeping hundreds of dollars cash at home.

I use debit card for groceries and a few other purchases.  I rarely write out actual checks.

I have one credit card and I use it to auto-pay a few bills, then pay the balance (or very close to it) once a month.  I check my credit report once a year and check my FICO every few months.

A few years ago I saw an Oprah show with several guests who had credit card debt in the range of $60-$70k.  I.cannot.even.imagine.  They were all frivolous spenders…………. huge mortgages on homes they couldn’t afford to begin with, nice cars, mani-pedis and expensive hair salons, etc.  Suze Orman was also there.

I was telling a friend about the show and she said “Well, you’d think Oprah would help them pay their debts.”  WHAT??!!  (She was serious!  )We kinda got into a bit of an argument.  Why should Oprah toss her money at these foolish people??

Hey, maybe Oprah and all the other wealthy celebs should all get together and pay everybody’s maxed-out credit card debts!!

[Dindrane]

I sometimes just think I am a child of the electronic age. I have never in my life balanced my checkbook (which has only gotten me into trouble once), and I've never been good about tracking receipts. My method of financial management is always to just check out my online transaction history, make sure I'm about where I expect to be and that there are no charges I can't remember making, and call it good. I know that part of the reason I can do that is because I am mostly not an impulse buyer at all. I do occasionally make impulse buys, but it's far more common to have to talk myself into buying something than out of buying it.

I also started using Mint.com for budgeting purposes about two years ago. It's an online tool (created by Intuit, the company that does TurboTax) that basically keeps track of all your financial transactions. You do have to provide them with your bank/credit card information, but since I already provide all my tax information through TurboTax, I decided I was fine with it. It sorts all the transactions by category (although you can adjust them), and lets you set up budgets for however many categories you want. It's really pretty cool, and now I have enough historic data that I can see long-term trends in my spending and saving habits.

So that's one reason why I only rarely use cash. The other is that I have a really sweet deal on my checking account. I have to have 12 debit transactions each month, so I tend to use those on the smallest purchases I can (often my and my husband's lunches out). If I meet that and a few other really easy criteria, I get all ATM fees refunded and I earn interest. If I don't meet the criteria, nothing happens.

So in order to make sure I do get the interest, and to maximize the amount of money that is in my account on the day it compounds, I switch to my credit card as soon as I have enough debit card transactions, and rarely use cash. That way, I earn points and get as much interest as possible. It works out to about $200 a year of free money (plus the credit card points, which I have yet to ever spend). I think it's worth the time I spend keeping an eye on everything.

I do try to keep a little bit of cash on me, just because it is sometimes the easiest (or only) way to pay for things. I usually just withdraw $20 every couple of months, and that seems to do it. I carry more cash when I'm traveling, but other than paying for a cab, it's almost never necessary.

[Softly Spoken]

We completely stopped using credit cards about three years ago, and use only debit.  Now that our balances are near zero on the cards, we are *snip*
We keep $1,000 in cash in our Go Bag, and $200 cash stowed in the house just in case.
*snip*

Sorry, what is a "Go Bag"?

Also I have read posts that are pro credit, pro debit, anti credit, anti debit...can anyone give me a straight answer about the pros/cons and the difference? I thought I read in a financial article that debit cards aren't safe because they aren't covered like cc's, and they give whoever steals it direct access to your bank account.

I have never owned a atm card or a debit card. I have only used cash or credit card, but believe it or not there are these things called "checks" that I still have to use once in a while. I only write one check a month - to my health insurance. To pay online I would have to fill out a form and jump through a lot of hoops/red tape for security reasons. For now it is just easier to write the dang check. I write a check for the mobile dog groomer who comes about every month/month and bathes and clips my dog. I don't like putting everything on my cc because I don't have a very high limit and there are auto payments that can max it out very quickly.

My brother has a compulsive shopping problem, and I thank deity that there are still places that do not take credit cards.

Can anyone explain to me why people literally spend money they don't have? I mean I can understand cutting it close or getting your bank account dangerously low...or holding your breath until your paycheck is deposited...but how/why do people spend thousands of dollars they were never even close to having?? I have never been in debt and I never want to be...but people seem to slip into it so easily...I can't wrap my brain around how it can happen at the level of devastation it occurs.

[amandaelizabeth]

I use my credit card, with less than $10 cash a month.  I pay the cards off in full every month and one of the cards is linked as a debit card to my savings a count.  That way if i want something  and I am not sure the store will accept a credit card i can still buy it.  This way i have accrued enough. Reward points for both us us to fly business class to Hawaii for husband's signifigant birthday - waving halloo to Midnight Kitty.  That is a lot of points from New Zealand.

All our bills are via credit card so,if there any disputes i have both a receipt and the card statement.  Only time i had a problem was a Couple of trips ago to USA.  Bank fixed it in minates.

[oceanus]

Can anyone explain to me why people literally spend money they don't have?

People often feel the need to "keep up with the Joneses".  They see their neighbors with new cars, they see their friends, relatives, and co-workers with new clothes, everyone they know has expensive electronic gadgets.  So they get all that "stuff" to impress, fit in, make themselves feel accepted.  They want to feel good, look good, and somehow they just can't admit they can't afford to spend money they don't have.  So they run up their credit cards to the max, get more credit cards and even get cash advances at those dreadful payday advance places, over and over.

As Suze Orman says, they go in debt buying things they don't really need or want to impress people they don't know and often don't even like.  They pretend they are well off and a lot more successful than they really are.

[Dindrane]

Also I have read posts that are pro credit, pro debit, anti credit, anti debit...can anyone give me a straight answer about the pros/cons and the difference? I thought I read in a financial article that debit cards aren't safe because they aren't covered like cc's, and they give whoever steals it direct access to your bank account.

I think that's one difference, although it probably depends upon the bank and the locality as to how it works.

Another major difference between debit and credit cards is that money spent with a debit card is gone immediately, while money spent with a credit card can be "floated" for up to a month without racking up any interest. Because of the way credit card billing cycles work, the money I am putting on my card now won't actually come out of my account until next month unless I pay it off early. If I just pay the statement balance each month, I'll essentially be getting an interest-free loan for about a month.

That difference doesn't always matter, but it can sometimes be advantageous to have a delay between spending the money and paying the bill. For some people, it's how they manage to maintain steady cash flow even between paychecks. I personally use the delay to maximize the interest I earn--my bank compounds interest monthly on the last day of the month, and I have my credit card set up to pay the statement balance closer to the middle of each month. So on the day that interest is compounded, my full paycheck has been deposited (I get paid once a month), but I haven't actually used any of it to pay bills yet.

Another difference is the rewards. Lots of credit cards offer points or cash back that give you some fraction of a dollar (or equivalent) for every dollar you spend. It takes awhile to get anything significant, but it does add up. Debit cards typically do not have this.

On the other hand, some stores I've shopped in offer a discount for cash, and include debit transactions in that discount, so that can be an advantage of using a debit card. You can also get cash back in a lot of places, which is a quick and easy way to get cash when you need it.

I don't like putting everything on my cc because I don't have a very high limit and there are auto payments that can max it out very quickly.

You may not have any interest in doing this, and it may not still work, but sometimes credit card companies will raise your limit if you ask them to.

I started out with a $500 limit on my credit card when I was a 20 year old college student with no income, and it's way, way more than that now. Mostly because I called and asked them to raise it a few times, and they raised it automatically a couple of times. It is very useful when I have a one-off unusually large expense (like the $3,000 we spent on airfare to visit my DH's family). It's rare for me to put more than 10% of my credit limit on my card in any one month (and it's usually quite a bit less than that). But it's nice to know it takes a lot to max it out in case I ever do need it.

[Slartibartfast]

Also I have read posts that are pro credit, pro debit, anti credit, anti debit...can anyone give me a straight answer about the pros/cons and the difference? I thought I read in a financial article that debit cards aren't safe because they aren't covered like cc's, and they give whoever steals it direct access to your bank account.

It depends a lot on your personality, honestly.  If you know you're an impulse shopper (ESPECIALLY if you're already in debt), owning a credit card can induce you to spend more money than you ought to.  I've seen advice about how people in this situation should only have one credit card, for emergencies, and should keep it in the freezer in a big block of ice - it prevents you from spending without thinking about it first.  Interest rates are absolutely ridiculous - most people who end up with huge credit card debt got a card when they were very young (you can get them at 18 in the US), before they had a solid income and the real-world knowledge to know what a realistic budget for their income would be.  Then that small debt can snowball into a huge debt quickly - credit card companies only require you to pay the minimum payment (often as low as $10/month).  Up until recently, though, they weren't required to tell you that it might take DECADES to pay off your debt if you only make the minimums!

Another major reason people end up in debt: ending up on the hook for someone else's mistakes.  Co-sign for a lease with your best friend?  When they throw a giant party and trash the apartment and then move out without paying their share of the lease, you're financially responsible for the whole thing.  Sister borrows your credit card without your permission and runs up a bunch of charges?  You either have to file a police report against her for stealing, or you're responsible for the debt.  This is particularly bad when marriages go south - a vindictive soon-to-be-ex can run up tens of thousands of dollars worth of debt and then just disappear, and you either get your credit score trashed or you pay for it.

On the other side of the spectrum, credit cards can be wonderful if you've got the discipline and the financial stability to pay them off in full every month.  Many have rewards programs - cash back, airline miles toward free flights, points toward concert tickets or free meals, etc.  The cards keep track of all your spending for you, making record-keeping easy, and you can contest charges so it's not just you against the merchant if there's a dispute.  If they're stolen, you're only liable for a small amount (~$50?).

Debit cards can also have rewards programs (and have the same drawbacks credit cards do re: spending not feeling like real money), but they offer the stability of a bank account behind them so you can't overspend.  Usually.  (Banks now have to let you opt out of their overdraft "protection" program if you want to, which usually means they let you charge things you don't have money for and then hit you with huge fees for the "convenience.")  You do have some protection if the card gets stolen, but it sometimes takes a while to get the money back and you can be up a creek in the meantime, especially if you're getting hit with OTHER fees for automatic drafts being taken out of your temporarily-drained account.  In the US they're more secure than credit cards for point-of-sale transactions, because debit cards almost always require a PIN and credit cards rarely do.

[Amara]

Can anyone explain to me why people literally spend money they don't have? I mean I can understand cutting it close or getting your bank account dangerously low...or holding your breath until your paycheck is deposited...but how/why do people spend thousands of dollars they were never even close to having?? I have never been in debt and I never want to be...but people seem to slip into it so easily...I can't wrap my brain around how it can happen at the level of devastation it occurs.

As a previous poster noted it can be the result of "keeping up with the Jones family." It can also be because that person is a compulsive debtor, similar to an alcoholic. It can also be a substitute for love, or to help depression. There are so many reasons.

The history of credit and debt fascinates me. I own a number of books on it, and the changes that Americans have gone through in regards to credit and debt since about the 1950s-1960s is complex and thought provoking. Credit cards took a long time to reach the consumer market but once they did banks discovered a limitless gold mine of revenue. Advertising also took off. Not that it was missing in the first half of the twentieth century, but when television became commonplace ads for consumer goods went wild. This coincided with the loosening of social restrictions. The "Joneses," which had been the role model for our own spending and been our neighbors, with whom we shared financial levels, became celebrities instead, people way outside most of our neighborhood. Debt was no longer viewed as socially negligent and has become because we (general "we") take pride in being credit worthy, and some view the gathering of credit cards as self-esteem

My sister on welfare had at one point three or four inches of credit cards if stacked on their side. Bankruptcy may still be embarrassing, but it's no longer shameful to many. Indeed, debt became a source of pride. So did the latest toys. Look how long our parents or grandparents kept things going, and compare that to today's frantic urge to replace last year's model.

It's so complex and interesting because it's more than just money. There's an entire social history in credit and debt, and people's attitudes today are shaped indelibly by it.