An argument against, "I use CC's and pay them off every month"

**Greebo** · 07-30-2008, 10:00 AM

I've heard them all, I think - reasons to use Credit Cards and then pay them off in full each month. Never mind that statistically, 57% of card holders carry a balance from month to month, that means 4 out of 10 ppl actually DO pay them off.

Never mind that more than half of bonus miles and other rewards are never cashed in, and that the reward programs are often so sneaky about blackout dates, etc., that its almost a moot point.

Never mind that on average, using a credit card means you are likely to spend 30-50% more than if you pay cash.

70% (or more) of US citizens today are living paycheck to paycheck. No savings, loss of a paycheck would be devastating, but looking good because they're making their payments. Now if 57% of ppl carry a balance, but 70% live p2p, then that means at LEAST 13% of ppl who pay off their cards in full are living paycheck to paycheck anyway - and possibly more. That means 30 percent - ONE IN THREE - of people who pay off the card each month are still in jeopardy of total financial collapse in the loss of a single paycheck.

So here's the one thing I heard just recently that struck me as incredibly profound about why NOT to use CC's and pay them off at the end of the month.

If you use a credit card to buy daily goods, and pay the card off every month, statistically you have a 1 in 3 chance that you are spending money you haven't got yet. Borrowing on the future for today is risky business - it's a rough world out there, and layoffs are all too common, not to mention loss of income from injury or illness. Money you don't have yet is money you can't afford to be spending. It's check floating over a longer time period, using a card instead of a check. It's a BAD idea...

Anti hypocrisy statement: *IF* you have money in the bank earmarked for something, and you use a CC to buy it for simple convenience (because maybe your debit card has a spending limit), and pay off the balance before you ever see a statement, I won't argue - because I actually do the very same thing with my business account for our rental. But in that case, I have sufficient funds in an account earmarked for renovations, and the Visa I use to buy tools and supplies at Home depot is paid off weekly from the business account.

But if you don't have cash on hand in an EF, then by definition, you ARE living paycheck to paycheck, and if you're using a CC to get rewards or just for convenience - you are playing in traffic.

Food for thought...

**NMMatt** · 07-30-2008, 10:11 AM

I'd say the only people for whom using credit cards and paying them off every month makes sense are those who have the self- discipline to have accumulated a well funded emergency fund, and have no history of debt. You could make the argument that the rewards programs, which are intended to lure in the debt prone, pay off marginally compared to debit cards for such a person.

My parents fit the bill. They are very prudent when it comes to money and my Dad earns lots of frequent flyer miles through work. They use a credit card to earn even more miles, but always pay it off in full and have enough in savings to cover their bills and then some. As a result they rarely pay for plane tickets for personal use. If you know how to work the system you can easily get award tickets - i.e. don't plan to fly over Christmas with miles, book well in advance, etc.

I've used credit cards like financial crack, so given my history, even if I were to accumulate a well funded emergency fund - It still would be like playing with fire for me.

**Greebo** · 07-30-2008, 10:12 AM

Originally Posted by NMMatt

I've used credit cards like financial crack, so given my history, even if I were to accumulate a well funded emergency fund - It still would be like playing with fire for me.

Same here. Give me a credit card, and its like giving an alcoholic a drink. I have to remind myself every time I see that business visa in my wallet, "NO, its JUST for the rental!!!". I'll be relieved when the renovations are done and I can put that card back on the shelf.

**Russ** · 07-30-2008, 10:15 AM

Originally Posted by Greebo

Food for thought...

I'll be thinking about this.
Currently we use ours for gas, things that are bought on-line and a few other things. Yes, paid off every month.

That being said, it really HURTS sometimes paying it off. yeeeouch!

**MTS04** · 07-30-2008, 10:21 AM

hmm...i use our credit card like an alternate form of a debit card. I charge what i need, then that day, send the cc payment for that charge.

**AmyBoz** · 07-30-2008, 10:27 AM

I have a more difficult time spending with a credit card than I do with cash. Why, I don't know, but that's me. When I have cash, it burns a hole in my wallet because I know it's right there, ready to be spent.

With my credit card, I have to gauge, will I be able to pay for this when the statement comes, and it makes me think more about using it. I know it is the opposite for many people...that they use CC so they can trick themselves into thinking it's free money.

However, using our 1 CC and paying our balance at the end of the month is what works for us. Certainly won't work for everyone, but works for us.

**blitzen** · 07-30-2008, 10:28 AM

I'm definitely an overspender when it comes to using credit cards. That's why I have to pay cash for everything--I always spend more!

**frugalfriend** · 07-30-2008, 10:33 AM

I'm loving this thread as it's been something I've been pondering for awhile now!

Will look forward to reading the responses.

As we discussed in another thread not too long ago, I rarely use credit so have considered giving my last few hold outs a "plasectomy" by sending them to Dave for his live show.

He has asked for people to send in cards we want to get rid of. I have one card that I rarely use that I've gotten free hotel stays with the reward points, which has been nice, but is it worth keeping? I have a Kohl's card that I opened about a year ago, to get between 15% - 30% off with the occasional purchases I make there when they have those promotions. Dh no longer uses his gas card (to track for business) because I asked him to use the debit card now (new job). So that's about it for us. When we use them I pay them off when the bill comes, no interest paid. BUT, I really like the mindset ~ NO CREDIT AGAIN EVER! I don't need it! Freeeeedom!!!

**elphie** · 07-30-2008, 10:38 AM

I think, like with everything else, you have to know yourself to decide what is right for you when it comes to credit cards. I know for me, I don't do well carrying one around but I do keep one in the house for certain online purchases. In this way I can always pay it off in full. A friend uses her Discover card for everything and they periodically send her a rewards check in the mail. She always pays her card in full and has never had a problem so this is a viable way for her to get extra money for doing nothing. I know that if it were me using it for everyday expenses I would probably not get *free* money because I would overspend and carry a balance. I choose not to use because I know my limitations. It works for her, not for me. We all have to find our own frugal groove.

**frugalfriend** · 07-30-2008, 10:57 AM

Couldn't get the multiple quote thingy to work.

Originally Posted by Greebo

So here's the one thing I heard just recently that struck me as incredibly profound about why NOT to use CC's and pay them off at the end of the month.

If you use a credit card to buy daily goods, and pay the card off every month, statistically you have a 1 in 3 chance that you are spending money you haven't got yet. Borrowing on the future for today is risky business - it's a rough world out there, and layoffs are all too common, not to mention loss of income from injury or illness. Money you don't have yet is money you can't afford to be spending. It's check floating over a longer time period, using a card instead of a check. It's a BAD idea...

I totally agree!

[/QUOTE]But if you don't have cash on hand in an EF, then by definition, you ARE living paycheck to paycheck, and if you're using a CC to get rewards or just for convenience - you are playing in traffic.[/QUOTE]

I do have the cash on hand, but I agree it still can be dangerous.

**itlw8** · 07-30-2008, 11:37 AM

I agree more than I want to admit... I do use a card for rewards I tend to save up for a $50 gift card to Home Depot.

I do pay the charges usually in a few days of the purchase but to often I am juggling and spending the cash a few days before I have it.... risky I know.... I am getting better as I build my savings but there is no doubt we are still living pay check to pay check.

still it is something I have to watch carefully.

ordering things online seems to be one of my weaknesses.... I avoid Ebay.

**grneyegrl** · 07-30-2008, 11:48 AM

first off my mother didnt name me them,yall or everyone for a reason,, she named me diana for a good reason, i am responsibe for my self and make my own choices in life..

i use a credit card and pay it off every month.. i get money to spend at bjs or cosco..so i use it as soon as i get it..

not having a credit card could mean that person has a problem paying it off or buying more than they can afford

i think,, i have to pay this off..so im careful with what i put on this card

**beks37** · 07-30-2008, 11:49 AM

I pay my credit cards off each and every month. I don't pay for daily things on my card, just the necessary items. For instance, my dh purchased a hockey jersey for $200 and put it on the card. It will be paid off before any interest starts accruing. Call it an interest free loan if you will. I know beyond a shadow of a doubt that I will be able to pay it off. Other things I put on the card are Sam's purchases (can only be made with Discover, MC or cash) and the other day Discover sent me a $10 off $20 purchase at Red Lobster. So we put that on the card too. The problem for some people starts when they purchase things on credit and then also pay for things out of their checking account (double spending if you will) and then don't have the money to pay it off. I however cannot stand the thought of paying credit card interest! That is why my CC gets paid off each and every month.

**Frugal Nurse** · 07-30-2008, 11:57 AM

PUT THE DAMN CARDS AWAY!

Better yet, send them to Dave Ramsey.
That's my philosophy.

If I don't travel with it - I don't use it.
PERIOD.
Ya, ya... 'what about those emergencies!"

Nothing's going to happen that you HAVE to have that card on you. I mean.. really.. you probably have a cell phone.. right? If you're nicely frugal and don't have one, the person standing next to you has one that you can borrow.

"Hunny! I'm at the gas station with a flat tire, can you bring me my card ... or... give me the numbers on it.. or, go get me some cash?"

That's the way it should be.

Lest their be trouble in the horizon.

**nuisance26** · 07-30-2008, 12:01 PM

~Well, in my case, I find that using my credit card helps me to spend a reasonable amount of money on myself and the house. I think I must have been born a miser. If I only have cash I will not spend it, period. I was one of those weird kids that would make a candy bar last for an entire week by rationing it out to a bite a day. I don't enjoy being miserly, it's involuntary! Not having to hand over cash allows me to spend which, I guess, proves your point. We average a $700 credit card bill every month which includes gas, groceries, insurance, clothes, gifts, vacation, personal, medical and household stuff. Aldi, thrift stores and yard sales are the only places that see my cash. Using my CC does not cause me to overspend the budget(which is $24K this year)but I know I'm an exception to the general rule. Oh, and we've never let our rewards expire or lapse. As soon as I've saved up $25 in points I order a rewards card. ~