10 Reasons I'm Cancelling My Credit Cards

[MNeagle]

by Brett Arends

The Treasury may be printing fewer dollars, but I'm going all cash.

The dollar bill needs you.

A growing number of merchants won't accept cash anymore. That includes a lot of airlines, which insist you pay by credit card if you want to buy a drink or a sandwich on board. And now comes news that the U.S. Treasury is printing fewer dollars (http://us.lrd.yahoo.com/SIG=12lsau90l/EXP=1311518620/**http%3A//www.nytimes.com/2011/07/07/business/07currency.html%3F_r=1), as we move towards an all-plastic economy.

Great news for the banks. Great news for the card companies. Great news for the marketing establishment, which can now pore through our transactions and our personal lives in greater and greater detail.

Me? Call me a contrarian, or just call me ornery, but I view this with gloom. This not a step forward. It's a step backwards. Personally, I've been moving the other way. I've cut down on my use of credit cards and debit cards. The latest news is the final push I needed to get them out of my life completely. I'm going all cash.

Here are 10 reasons why:

1. I'll spend less. A variety of scientific studies, such as this one (http://us.lrd.yahoo.com/SIG=12h0ba61f/EXP=1311518620/**http%3A//web.mit.edu/simester/Public/Papers/Alwaysleavehome.pdf) at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.

2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.

3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.

4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.

5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.

6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).

7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.

8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.

9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).

10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.

http://finance.yahoo.com/banking-budgeting/article/113093/reasons-cancel-credit-cards-smartmoney?mod=bb-budgeting

[skid]

I like cash too. Most of my purchases are cash...

[Ponce]

But forwhat I buy on line everything else is cash.......if I dont have the cash in the bank I dont buy on line.

First post of the day............good morning to one and all.

[gunDriller]

+ one very good reason - the credit card companies screw you every chance they get. at least VISA/ B of A does.

i cancelled my VISA account because, several months in a row, i paid my bill on time - and they claimed the right to charge me a service charge.

basically, American credit card companies (VISA & Mastercard) = usury on steroids.

[BrewTech]

Good financial advice on Yahoo? Recommending support of local merchants instead of the banks? Financial anonymity?

Treasonous!

[mamboni]

This is exactly how I live - cash only. My wife pays certain household bills with AMEX as plastic is unavoidable. I always have an ounce worth of gold in cash in my pocket - that is all. When one carries cash, one tends to hold onto it and spend it begrudgingly.

[palani]

Those who engage in commerce using cash and yet proclaim they do not use credit could be considered to use the same logic as this "gentleman".


Place a glass of liquor on the table, put a hat over it, and say, "I will engage to drink every drop of that liquor, and yet I'll not touch the hat." You then get under the table; and after giving three knocks, you make a noise with your mouth, as if you were swallowing the liquor. Then, getting from under the table, say "Now, gentlemen, be pleased to look." Some one, eager to see if you have drunk the liquor, will raise the hat; when you instantly take the glass and swallow the contents, saying, "Gentlemen I have fulfilled my promise: you are all witnesses that I did not touch the hat."

[vacuum]

The OP gave a lot of good reasons not use credit cards, but not necessarily for canceling them. Having a large line of credit available that can be cashed in in a shtf situation just before things get bad seems like a good idea to me. That is, if you've got the will power not to prematurely use it.

[Golden]

The dollar bill needs you. /cringe

Uncle Sam, is that you?

[Uncle Salty]

Those who engage in commerce using cash and yet proclaim they do not use credit could be considered to use the same logic as this "gentleman".

The issue seems to be spending of money that one does not have and further going in debt. I haven't read anywhere that people who use cash don't use credit. It is credit cards they are not using.

Our money is debt, so yes, credit in one sense of the word is being used, but not in the credit card sense of the word. They are not spending money they do not have. They are not going further in debt by using cash.

[palani]

A FRN is a debt instrument. Should you avoid plastic and proclaim you use no credit by using a FRN then you are relying upon as much slight of language as the gentleman who would obtain a drink without lifting a hat. Somebody had to lift the hat. Somebody had to issue a FRN in the denomination of $1. The one who holds the $1 FRN is not a creditor. He is just as much a debtor as if he had used plastic.

An invisible lien goes out to touch whatever is purchased with that $1 of FRN credit. The entirety of society that relies upon a paper FRN for its purchases owns not a single item.

[Golden]

The issue seems to be spending of money that one does not have and further going in debt. I haven't read anywhere that people who use cash don't use credit. It is credit cards they are not using.

Our money is debt, so yes, credit in one sense of the word is being used, but not in the credit card sense of the word. They are not spending money they do not have. They are not going further in debt by using cash.

Can you make such a promise?

[vacuum]

A FRN is a debt instrument. Should you avoid plastic and proclaim you use no credit by using a FRN then you are relying upon as much slight of language as the gentleman who would obtain a drink without lifting a hat. Somebody had to lift the hat. Somebody had to issue a FRN in the denomination of $1. The one who holds the $1 FRN is not a creditor. He is just as much a debtor as if he had used plastic.

An invisible lien goes out to touch whatever is purchased with that $1 of FRN credit. The entirety of society that relies upon a paper FRN for its purchases owns not a single item.

True, but there is a difference - a credit card is personal debt, while a FRN is collective debt. Personal debt has personal consequences, collective debt has collective consequences, which I'd say is a situation which has more options.

[palani]

True, but there is a difference - a credit card is personal debt, while a FRN is collective debt. Personal debt has personal consequences, collective debt has collective consequences, which I'd say is a situation which has more options.

I presume by "more options" you are referring to the cumulative effects of budget overruns on a national scale as opposed to the cumulative effect of budget overruns on a personal scale. The only free ride in comparing these options is bankruptcy on a national scale vs bankruptcy on a personal scale. A bankrupt nation is a nation of bankrupts. The route you take to get to this conclusion might reveal more interesting scenery in the journey but the destination is still going to be the same.

[Joe King]

AFAIK, paper "money" (frn) is but the physical evidence of someone elses debt. They only exist because someone else or something else accepted credit and used it to discharge their debts with, thereby placing it in circulation.
ie using cash just means you are using someone elses credit, as opposed to accepting your own. It could be your neighbors credit, or even the fed govs credit. Who knows. But if they ever put RFID chips in them, they will know whos it is.

If everyone, including businesses, took the approach espoused in the OP of only using currently existing cash while still attempting to discharge their own debts with that cash, all the cash would eventually be turned back into the thin air from whence it came.
... and there would still be debt owed.

[Uncle Salty]

The point of the article is about living within one's means. Not about the debt nature of money in general.

But some here just want to sound really really smart by raising straw man arguments that have nothing to do with the original point.

Use cash and don't go into more personal debt and don't allow the big brother brother network track your every move. Pretty simple and hard to argue against.

But go ahead and raise issues not germane to the point being made. We will all be so impressed.

[Joe King]

The point of the article is about living within one's means. Not about the debt nature of money in general.

But some here just want to sound really really smart by raising straw man arguments that have nothing to do with the original point.

Use cash and don't go into more personal debt and don't allow the big brother brother network track your every move. Pretty simple and hard to argue against.

But go ahead and raise issues not germane to the point being made. We will all be so impressed.

Uncle Salty, I understand what you are saying. But the consequences of people, on a large scale, doing so while also continuing to discharge their previously existing debts with that cash, it will make the cash go away.
ie under the current monetary system, everyone living within their current means is unsustainable.


Now, if you are talking about everyone participating in a mass-default and then doing nothing more than to continue to circulate the existing cash amongst ourselves as a means of exchange, while really pretending the paper is worth something, then that may be different.

But that would bring about a massive deflation and leave us with not nearly enough paper in sufficient quantitys for 300+ million people to be able to conduct business with it.
ie there's probably only about $3000 in cash available per person in the system, and a lot of that is off-shore.

[freespirit]

what about the barter system? seems to not only be alive and well, but thriving. it could certainly see a marked increase in popularity when the current system crashes...and using the barter system helps people to avoid using their cash or credit cards. in my community there is a very good barter system that both private individuals and local business can participate in. you can barter anything from clothing to skilled labor to food to whatever...comes in handy when money is scarce.

[Golden]

The point of the article is about living within one's means. Not about the debt nature of money in general.

But some here just want to sound really really smart by raising straw man arguments that have nothing to do with the original point.

Use cash and don't go into more personal debt and don't allow the big brother brother network track your every move. Pretty simple and hard to argue against.

But go ahead and raise issues not germane to the point being made. We will all be so impressed.

Who are you addressing?

[Joe King]

what about the barter system? seems to not only be alive and well, but thriving. it could certainly see a marked increase in popularity when the current system crashes...and using the barter system helps people to avoid using their cash or credit cards. in my community there is a very good barter system that both private individuals and local business can participate in. you can barter anything from clothing to skilled labor to food to whatever...comes in handy when money is scarce.
Bartering would help prolong the inevitable, but it wouldn't prevent it.

In a debt based system, either sufficient numbers of people corporations and the gov continue to replenish the "money" supply via borrowing, or the "money" starts going away until it's all gone.
Resulting in the nation being reduced to 3rd world status. Or possibly even less.

Besides, assuming the World was reduced to a barter-only system, where would new manufactured goods come from as the stuff people already had to barter with, wears out?

[Silver Rocket Bitches!]

11. A giant solar flare could knock out the credit card infrastructure in a instant leaving those without cash with nothing.

[Uncle Salty]

12. Real men carry cash...and lots of it.

[po boy]

12.revised......carry gold or silver.

[Uncle Salty]

12. Real men carry FRN's...and lots of them...until the FRN's are useless...and then carry lots of gold or silver.

I am not ready to "spend" my gold or silver yet...so FRN's will have to do.

[zap]

12. Real men carry FRN's...and lots of them...until the FRN's are useless...and then carry lots of gold or silver.



LOL Real women carry FRN's too LOTS OF THEM ! I really hate to carry cash though because I rarely carry a purse, I just grab a handful of cash, wad it up and put it in my pocket :) I have a rough time keeping track of it.