DISQUS

KC · 4 months ago

I've often pondered this dilemma. But I think getting rid of cc is just too hard. They are easy to use and I know plenty of people who pay them off monthly and just use them for convenience. That being said if I pay in cash I'll often ask for a discount. Sometimes it works - especially at small businesses. I visit a hobby store and if I pay cash he gives me a 3% discount. I'll often pay cash at mom n pop stores anyway just so they don't have to pay cc fees. That may be the only real way to battle it - only use cc at the big chains.

That being said, use cash and I guarantee you'll spend less. A couple years ago I got a call one morning saying their was a fraud alert on my cc and they were going to cancel my current one and issue me a new one. In the mean time...I needed some groceries. So I go to the bank and take out $200 cash specifically for groceries. I normally spend around $100, so $200 was plenty. But knowing I had a distinct limit made me very careful in the grocery store. I only bought "real" food - bread, milk, chicken, fruits, veggies. And I only bought the quantity I knew I needed right then. I was so paranoid I'd go over $200. The funny thing is I checked out and only spent $45! I saved 55%! When I shop now I still use credit, but I try to remember that day and only buy things I really need - its helped my diet, too.

Brandon Barkley · 4 months ago

You could invest in Visa. :)

Rassah · 4 months ago

There's always costs associated with exchanging money. If, hypothetically, EVERYONE dropped CCs and started paying in cash, the Fed would have to start printing a heck of a lot more paper and coins, and we'd all get charged higher taxes for the process. It's either the government, or the private companies. CCs may be slightly more expensive than a tax hike in the end, but I'm willing to pay for the convenience.

Omarrr · 4 months ago

Congratulations on the site. Now, could you point out to us any reason on that list that does NOT apply to debit cards? I have no CCs and I see no reason for it. I have all the benefits that you listed above without any of the disadvantages:
- You don't have to pay back Debit cards, therefore there is no risk of late fees.
- No ridiculous interest rates if you happen to forget your due date.
- You are more conscious of your spending habits, so you never overspend, because you are using only the money you have.
And that's not to mention the disadvantages for merchants that you talked about.
Some people will see reasons to use CC, but none of the reasons you listed there should make anyone decide for them. Do you want to use a CC to get credit and pay for that house you can't afford with a loan? Then go ahead, otherwise, be smart and stay away from them. Simple.

Rassah · 4 months ago

Regarding point 3, if you don't have the money, the bank will still gladly let you overspend, and then tack on a $35 overdraft fee. My brother got into a lot of trouble with those, since he was using his debit card like a line of credit. As for debit cards, the banks in my area have been raising the fees more and more on those. Once it went over $0.50 a transaction, plus possible "outside of ATM network" fees, even though you're at grocery register instead of ATM, I dropped them entirely.

Omarrr · 4 months ago

That's a good point to remember that not even debit cards are all good.

KC · 4 months ago

Yes, did that recently on my checking account. One little error and the bank "lent" me the money...at $35 a pop. Learned my lesson. Anyway, I've had my credit card number stolen a number of times. At least once it was in a retailer's data base, saved for future use. Someone hacked their system and got my number. But the cc company forgave the illegal charges. A debit card would not do that - the money is gone...forever and those crooks then have access to you bank account until the money is gone or you get everything moved out of there. I just can't use my debit card for that reason. It is too easy to hack a system or just too easy for an unethical employee to steal my number off a receipt.

Matt · 4 months ago

I definitely try and use my credit cards as little as possible now. Once in a while they are useful from a cash management perspective, but in general there is no point in having one more middleman who takes a 3-5% cut of every single purchase we make.

Thanks for encouraging people to reconsider their credit card use. I think it's quite important.

Hunter Johnson · 4 months ago

There's nothing "fast and loose" about a cash discount. Sure, it absolutely counters what the credit card companies *want* merchants to do, but thankfully the credit card companies can't dictate how businesses handle transactions that don't involve credit cards. If it were a law, it'd violate the spirit of the law -- but it's not a law.

Since rational merchants must include the cost of credit card processing in their prices (because of the rules of the game set up by the credit card companies), rational consumers can't be faulted for "getting what they're paying for" by using a nice rewards-card and paying off the balance each month. But if a merchant offers a cash discount that's worth more than my rewards for using the credit card, I'll happily (and rationally) pay cash instead. And I'll ask up front if they have a cash discount, because many times it won't be posted or plainly announced.

Jim · 4 months ago

Hunter is correct. It is OK for merchants to charge less for cash. Visa & Mastercard both explicitly say this in their merchant agreements.

But their rules do not allow people to charge a fee just for the credit card transaction.
It might sound like its the same thing but its not. If they allowed people to charge a fee then you'd see +2% fee tacked on for Visa or +5% for AMex, +3% for Discover, etc. and the merchants would be competing based on fees. Thats what the credit card companies all don't want to see. But if you just get 5¢ /gallon off on cash then only cash is at an advantage but all other forms of payment are on equal footing.

No Debt Plan · 4 months ago

The merchant-side cost of accepting credit cards is similar to accepting debit cards. It's a cost of doing business and for many folks, a very small cost of doing business. I had someone comment on my blog once around the same topic. Said he ran a restaurant and the cost of overhead for CCs was 0.7%. He said if they dropped all fees he wouldn't drop prices 0.7% -- wasn't worth it.

There are additional costs of using paper money -- namely, tracking and counterfeiting. Take a fake bill and not much you can do if you don't check it. Plus then you have to watch your own employees for theft. With a properly run credit card (physically run with all the security information verifying it is a real card) then your risk of a charge back goes down dramatically. And you don't have to worry if it is fake (again if it is a physically run card).

lrgche · 4 months ago

Everything on your list applies to DEBIT cards. Everything, INCLUDING the rewards. Of course this is dependent on who you bank with and whether they offer it or not.

IMHO you will never be able to justify a credit card over a debit card.

For example Reward Check Card from BB&T:
http://www.bbt.com/bbt/bbtvisaextras/default.ht...
or straight from Visa
https://www.visaextras.com/

Flexo · 4 months ago

The problem with debit cards is the instant access to your checking account.. for many people the same account from which bills, like mortgage or rent, or paid. An errant debit card purchase or hold, and perhaps a subsequent check or automated payment, could send your checking account into an overdraft fee free-for-all that is usually difficult to unravel, if it is possible at all.

Furthermore, most debit cards do not have zero liability protection. And even the ones that do still put your checking account at risk in the short term. It could take a month to for a bank to refund money erroneously removed from your checking account. With a credit card your money is never at risk.

David C · 4 months ago

But remember that those transactions have to run as CREDIT (aka 'no PIN' aka 'signature') transactions, so from the merchant's perspective those debit card transactions cost just as much as a credit card transaction.

See also: http://www.consumerismcommentary.com/2009/08/06...

SavingEverything · 4 months ago

For the merchant, the consumer who uses a debit card costs less than the consumer who uses a credit card, or even a preferred or world credit card.