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

[buvezdevin]

I use a debit card frequently, cash and checks rarely, and credit card not at all except for business.

Less than a year ago, my debit card was compromised which I found out when my bank called me to ask about some recent charges.  All the suspect charges were small, most on Apple a couple on Amazon - not on my accounts there but using my card.  The bank rep said that it was common for those using stolen cards to first try out small charges on those sites.  The bank issued a new card to me, and credited back to me the less than $100 in fraudulent charges.

I asked the bank security department how the info might have been stolen, and what I could do to limit risk.  They mentioned the higher likelihood of info being at risk at gas/convenience stores and also explained a newer risk of cards with chips being suseptible to being stolen by scanner when out in any public setting - here is a link to related story: http://www.wjactv.com/news/news/remote-scanner-can-steal-credit-card-information/nDcT3/

[Snooks]

We have three credit cards and they're all used for different purposes based on their rewards.  One card gives us 1% back on everything we spend, we use that to buy nearly everything.  One card gives us 3% on petrol and 2% in department stores, it also offers 1% on supermarket shopping but we use the other card for that.  The third card is used very rarely (although at least once every six months to avoid penalty fees) and it's one that doesn't charge us a commission on foreign transactions so we use it abroad and if we're buying things off the internet in a foreign country (don't worry I'm not using it to help out an unfortunate Nigerian businessman who just needs $X from me to free up his fortune  ).  All of those are paid off in full each month, I had it drilled into me that you never, ever leave a balance on a credit card.

All our bills are paid by direct debit straight from our bank account which gives us varying percentages back on each of those bills.  It's 3% on tv, broadband and phone direct debits, 2% on gas and electric direct debits and 1% on water, council tax and if we had our mortgage with them we'd get 1% back on that too, but our mortgage isn't with them.

I can't remember the last time I used my debit card for something other than taking cash out.  We're both really bad about carrying cash because we pay for nearly everything on card.  The only things I can think of that we don't use the credit card for are the sports clubs we attend where we pay a fee for the class that night, or when I go out for lunch with a friend it's easier to leave cash and get back to work.

I could really do with a financial advisor but I'm not sure where to start so I just use the Money Saving Expert website and stick to standard accounts offered by banks.

[Outdoor Girl]

I use my credit card so that the money stays in my account longer.  I even time some large purchases so they are just over the roll-over date on my credit card, which means I don't actually have to pay for that item for 6 weeks.

I have a bank account, which includes my mortgage, that works like a line of credit so the longer my balance is up, the less interest I pay in the long run.  I love this account; since I moved my mortgage over, it looks like it is going to be paid off about 4 years earlier than if I'd left it as a traditional mortgage.

[MummySweet]

I've recently encountered a very frustrating circumstance with my credit card.   

When I got married I became a SAHM.  Most of our finances are combined but I kept one credit card in my own name to ensure that I would always have a credit history separate from my husband's and to ensure that I would always have some credit to draw on in case of emergency.  (I have two friends who were suddenly widowed and had some real financial struggles because all joint accounts and cards were frozen.) 

I have always paid my balances off immediately and often went several months without using my card.  Several weeks ago I tried to use the card and it was declined.  When I called the credit card company to ask why, I was informed that they had closed my account because I was not using it.   I got a very chatty representative and when I challenged her for a reason because I have always had excellent credit, and had had a card with them for 22 years,  she explained that current economic conditions had led them to decide to pull credit lines that were not being used (that they weren't making money on) to be able to extend credit to customers  who were using it (paying interest fees).   They even told me that in cases where the card was being regularly used, but immediately being paid (no interest)  they were reducing the credit lines significantly.   

So now I am without my own line of credit because they will not reopen the account, and no one will give me new credit card because I do not have an independent income.     My only option appears to be to purchase a CD and use that to secure a card... at least it will protect me in case of emergency. 
 

[oceanus]

That really stinks, MummySweet.
A friend went thru something similar and her cc acct was also closed after a stellar payment history for several years but not using it for awhile.  She also heard jibberish about the economic times.  How frustrating!

[Softly Spoken]

^^ Okay now I am worried - can they close my cc account just because I pay on time? Am I okay as long as I use it regularly?

[oceanus]

Well, I knpw someone who used his cc but paid it off every month (didn't carry a balance) and his limit was reduced from $4,000 to $300 - with no advance notice.

[alkira6]

Well, I knpw someone who used his cc but paid it off every month (didn't carry a balance) and his limit was reduced from $4,000 to $300 - with no advance notice.

The above happened to me and I didn't know it until I was trying to charge a $500 medical procedure co-pay the morning I was to go into surgery. So much for that "emergency" credit card.

As for my financial ups and downs, I went to college and got three credit cards to build up a credit history.  Fast forward 6 years, depression issues, retail therapy, and blatant financial irresponcibility, I was $24,000 dollars in debt and not yet 25. After years of real financial planning with a few slip ups here and there, most of that has been paid off. DH and I are on the last year and a half of paying off all of our non-mortgage/student loan debt.

Our credit card use focuses on 2 particular cards that offer cash back and rewards points. These two are paid off every month.  Rewards points are either converted to gas cards or cash cards and are used to pay for our vacation every year.  We carry no more than $10 in cash a piece because cash makes us spend until there is no more and then whip out the debit card.  Our strategy is to just not spend money unless it is on gas and then all other purchases are made together.  Sounds really co-dependent, but it has worked for us.  All spendign is logged in on a spreadsheet that tracks our income, spending, large budgeted future purchases, and savings.  We came very close to financial disaster before we cut back on spending.

[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 *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"?

A "Go Bag" is anywhere from 2-5 days worth of necessities gathered in one place that you can "grab & go".  It's useful if you have to evacuate an area due to events or if you are stuck somewhere also due to events.  Events include a hurricane, flood, stuck overnight in your car on the interstate because of snow, or someone flies a plane into the side of a building.  Typical things in a go bag are cash, medication, flashlights, batteries, solar or crank powered radio, a pack of playing cards, a roll of toilet paper, extra socks & shirts, and food items.

[KenveeB]

I use my credit card almost exclusively. I hate using cash -- it just kind of disappears here and there with no record of it. On my CC, I have a record of it even if I forget to write it down when I spend it. I use an AmEx Blue card, which doesn't have an annual fee but still has a lot of the protections and rewards of AmEx. I use it for 90% of my transactions, and I use the rewards either to splurge on something for me or to buy Christmas gifts at the end of the year. (I can use the reward points directly as cash on Amazon, which is awesome.) I have a backup Visa that I've had since college. That kind of long-term card gives a nice boost to your credit history, and it's important to have a backup since not everyone takes AmEx. I usually keep no more than $20 cash on me and use it for incidentals -- buying a lottery ticket and a coke when I get gas or something like that.

I figure using credit card only makes the most sense, as long as you are disciplined enough to only spend your budget. If cash is stolen, it's just gone. If I use my debit or CC, I'm only liable for a small amount. But with the debit card, the money is gone from my account immediately and might take time to get back, so I might not be able to do my usual spending while I do that. With the CC, I'm totally protected. Plus, if I ever have a dispute with a merchant, I can unleash the ravening hordes of AmEx on them. That scares them a LOT more than just me getting mad. With that and the rewards, I'm basically getting paid to spend money in a more secure way. Definitely a win-win.

For budgeting, I have an app called EEBA. It basically has a bunch of "envelopes" that you put virtual cash in. I have them for things like Groceries, Gas, Bills (the ones that get auto-charged to my CC), and Fun Money. I have it set up so the budget month starts on the day my new CC statement starts, and I fill the envelopes to the budgeted amount. Every purchase on my CC, I enter it into the appropriate envelope. It's made a huge difference for me on budgeting! (And it's a free app. )

The only thing I save cash for is when I'm saving up for a vacation or something. I save up money as I get a little extra throughout the year and tuck it in an envelope. When it's time for vacation, however much I've saved is my spending money. No using the CC except for something like the hotel, which is pre-budgeted.

[Jones]

I have one credit card, it's only good at a couple stores so I had it for big purchases and emergencies; didn't use it for a good 6 months, it went from $2000 to $250.

[siamesecat2965]

  I can unleash the ravening hordes of AmEx on them.  

i love this! And its so true! Am Ex has the best customer service out there!

I mainly use cash, with credit for larger, unexpected or emergency purchases. Or anything there might be an issue with, i.e. car rental, or other travel so a hold won't go on my debit card.

My routine is to take out a set amount every week, for groceries, gas, etc. For me, if I see it, its easier to keep track. When I've only used my debit, I tend to overspend.  Whatever is leftover each week, goes into an envelope. if i run short one week, I take from that stash, rather than hit the ATM again.

I only have Am Ex, actually 3, one regular, one "charge" and third, which used to be a VISA and doubles as a dept store card, but switched to Am Ex a few years back. While I'd like to have a Visa or MC as backup, I also have a lot of cc debt, which I'm working on paying down. And since I need a car loan shortly, I'm trying not to get any more credit. I figure once the debt is gone, I can apply for a Visa at my credit union.  I don't want to get rid of the others since they will ding my credit score.

Larger purchases, even if I have the cash, I use Am Ex whenever I can. a. for the points and b. for the protection. If something goes wrong, and I need to dispute it, I know I can  count on them. 

[jedikaiti]

A lot of the cash v. plastic debate seems, to me, a matter of what works for you.

For me, cash on hand will vanish into the ether. But I know someone else who parses out her paychecks into envelopes marked for certain purposes (gas, groceries, etc.) and budgets that way. For me, I need that bottom number in Quicken - cash just vanishes without a trace.

Of course, I'm usually using my debit card as a credit card, so it's still effectively just cash out of my account, but with rewards.

[Luci45]

We use our gasoline credit card mostly. Recently we got 20 gallons of fuel for $2.29 - really fun. (That was $2.29 total, not per gallon    ) We have two others, one from another company that we use when the  bonuses are 5% at certain places, and the one in my name only that accrues bonuses on my Amazon account. We pay them all off every month. I think it has been over 30 years since we have had a balance on a credit card, and that was on purpose. They always get a swipe charge, so I can't imagine why credit card companies would call us who pay off the balance every month deadbeats.

We have only had a debit card once when we an automatic withdrawal for our cable TV. It was awful. I didn't ever use it for purchases because I am afraid I can't keep track of it for our bank balance.

We always use cash in town and at small businesses when we travel because I don't want to burden them with the swipe charge on the credit card, although I am pretty sure most of them build that into pricing. I guess I consider it a kind of an unofficial tip. We do have a Walmart here where we always use the credit card.

[Dindrane]

One question I always have when topics like these come up is what people mean by "paying off" the credit card each month.

I know that just about every credit card I've ever heard of gives you (essentially) three options when the bill is due. Just as a hypothetical, let's say that I have a credit card with a $500 limit. My minimum payment is $10, and I get each bill for the previous billing cycle two weeks into the next one. I spent $250 during the last billing cycle, so my bill is for $250. Since that billing cycle ended, I have put another $100 on the card, so my total charges equal $350 when I actually get the bill.

Option 1 is to pay something between $10 and $250, which would mean interest on the difference between $250 and what I paid. Option 2 is to pay the statement balance of $250, which results in no interest charged. Option 3 is to pay everything at $350, which also results in no interest charged.

So when you talk about paying off the credit card each month, are you talking about option 2 or option 3?

Personally, I always pay the statement balance. I've never been charged interest or paid any sort of late fee. I've had the card for about 8 years and I have never seen the limit change except to go up. Granted, it is my only credit card and I don't tend to use cash, so I put charges on it at least every other day or so.