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Bend Over… I’ll Show You Where You Can Stick Your ‘Rewards’.

in Money Basics, Pay Off Your Debt, Rants

BendOver

I’ve had it.

I’m going to lose it if I hear one more person say, “Well… if you aren’t responsible with credit cards, then obviously you should cancel them.” Or, “If you can’t control yourself, then it makes sense to get rid of your credit cards.”

I’m sick of people implying that irresponsibility is the only justification for rejecting credit cards.  It’s not.

Purging credit cards from your life has many tangible benefits. In the very first week of this blog, I wrote a post detailing the specific benefits and drawbacks to canceling credit cards.  Since then, I’ve outlined the different mental associations I have when spending on credit, debit, and cash respectively.  I’ve even challenged you to be aware of your own spending patterns when using different methods of payment.

But none of this is what I want to focus on today. We could debate minutia all day long, but these aren’t the real reasons Courtney and I choose to live without credit cards.

Feeding on the vulnerable

For me, the credit card industry is on the same level with the gambling and tobacco industries.  I don’t mind the rare celebratory cigar, nor do I object to mindfully spending some of the entertainment budget at a casino.

However, the blunt truth is all three of these industries derive a large percentage of their profits from a select group of people who are caught up in destructive, cyclical habits.  They feed off their respective junkies.

Look, I’m a firm believer in personal responsibility.  In all three cases, it’s on the individual to take back control of their lives.  But, in the meanwhile, this doesn’t give us a blank slate to support the companies and industries whom derive value from keeping them trapped.

The nature of capitalism gives these companies the ability to profit immensely off of those in vulnerable positions (even if they put themselves there).  But the real beauty is that this same capitalism allows me to tell credit card companies to shove it.  We all get the choice to opt-out.

I’m not bold enough to say that everyone who uses a credit card contributes to the problem.  While there is certainly a case, I’m not yet convinced the issue is that cut and dry.

In my own life, though, I’m not willing to take the chance. I have control over my actions.  I choose what industries, products, and services I take part in.  Credit cards will never be one of them.  If I don’t have to be a part of that industry, I won’t.  It’s that simple.

I’m a vegetarian…

I don’t eat meat.  Why?  There is no single answer.

I’m vegetarian in part because of statistics on global sustainability.  I’m a vegetarian in part because I believe the lifestyle has long-term health benefits.  I’m a vegetarian in part because a portion of the meat industry treats animals like shit.

There was no straw that broke my back more than another.  One day, several years ago, I just realized I had a choice.  I could choose to have a more sustainable, less cruel, and healthier lifestyle.  So I did.

Do I miss out on some potential benefits from consuming meat?  You betcha.  Removing meat doesn’t automatically make you some beacon of health.  I’m living proof you can be a fat, out-of-shape vegetarian. The choice is not always easy and it’s not always convenient.

But in the end, this lifestyle decision fits snugly within my value system and reinforces what I believe to be positive long-term behavior.  What more can we ask for in life?

You know one thing I’ve never had anyone say to me?  Nobody’s ever quipped, “If you can’t eat meat responsibility, then I guess it makes sense to be a vegetarian.”

That’s what I don’t get. Are the two lifestyle decisions really that different?  Think about it.  In my life, they mirror each other flawlessly.  Responsibility isn’t the trigger in these lifestyle decisions.  It’s about living consistently within your values.

I’m getting ready to quote myself…

As I was thumbing through some of my old articles on this issue, one passage really stood out to me.  I thought it summarized an important point I wanted to reiterate.  In the post, 3 Habits of Highly-Responsible Credit Card Users, I wrote the following:

When it comes to games, I have some previous experience.  I’ve traveled the country playing video games for money.  I’ve played collective card games with rooms full of the best in the world.  I spent years dealing, playing, and hosting poker tournaments for hundreds of people nightly.

It is no secret I have a killer gaming instinct.  I go for the throat. I exploit loopholes.  I’m one of those people.

Over the years though, I’ve learn two very important lessons the hard way:

  1. Don’t try to beat someone at their own game. It’s not impossible to beat people who’ve spent their whole lives studying a specific game, but it’s rare to have consistent long-term success.  Even if you are able to obtain a string of consistent wins, often times the price you’ve paid isn’t worth it.  If I have to spend 16 hours a day studying backgammon to beat you consistently, we better be playing for some major keeps.  My time is much better spent finding suckers to play my own game than studying to beat you at yours.
  2. No matter how often you win, eventually you have to enjoy your opponent. Sure winning is fun.  At first, beating the annoying fat kid out of his lunch money might be worth it.  But after the tenth time, you’d rather break the lunch tray over your head than play him again.  Suddenly his $2 isn’t worth your time.  Yeah, you’d play him for $10 a game, but he’s fat.  He spends most of his money on food before offering to play you.

At some point during our financial turnaround, I realized that the fat annoying kids that run the credit card companies have been playing this game for a long time. Sitting in the back of the lunch room and flipping them the bird feels more liberating than you can imagine.

I used to play just to win. But I realized that despite what your high school football coach told you, winning isn’t everything.  It’s not always fulfilling.  The longer I live, the more it’s not about winning the game, but about enjoying playing it.

This recent realization is all the ‘reward’ I need.  I’m not interested in the bonuses or points you are offering.  Your Jedi mind tricks won’t work on me.

You’ve read what I have to say.  Now the megaphone is yours.  I’m looking forward to hearing your thoughts below.

{ 101 comments… read them below or add one }

Matt Jabs October 5, 2009 at 9:44 AM

“…these industries derive a large percentage of their profits from a select group of people who are caught up in destructive, cyclical habits. They feed off their respective junkies.”

You have hit on the exact same topic that I have just come to realize. It’s funny because over the weekend I shredded all my old cards (that I recently paid off) and am closing the accounts today. Those who read my blog know that I wrote several articles last week engaging readers on the topic of paying off and properly using credit cards. What did the majority of my polled users say?

51% said “Close ‘em, shred ‘em, and forget ‘em!”
33% said “Risk fees, leverage rewards, and laugh all the way to the bank!”
16% said “Shred ‘em but leave open and risk fees in hope of increased FICO score”

What am I going to do? Mostly for the reasons outlined here in your post I chose to follow DFA readers and Close ‘em, shred ‘em, and forget ‘em!
.-= Matt Jabs´s last blog ..Wise Use of Paid off Credit Cards? You Decide. =-.

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Baker October 5, 2009 at 10:02 AM

Matt, we made the same decision last December and are loving it. There’s just so much peace of mind knowing that we don’t have to worry about erroneous fees, changes of service, or identity theft on those particular cards. I know you’ll love it, too.

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MoneyEnergy October 5, 2009 at 1:24 PM

Nice to hear someone else taking an ethical stand in regard to finances – putting credit card companies on the same level as tobacco and gambling, etc. – and realizing they prey on the vulnerable. I agree. Personal responsibility and individual success (or failures) don’t lie in a vaccuum. There are always broader structures at work which contribute to it. Also, it seems that the credit card industry in the U.S. in particular is particularly venomous and predatory this way – I’ve had very different experiences now that I’ve got a U.S. credit card. So I completely see your position!

I will probably never go credit-card free, but this is also not because I use my credit cards for rewards – I don’t.
.-= MoneyEnergy´s last blog ..Will the September Correction Come in October? =-.

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Mr. Not the Jet Set October 6, 2009 at 8:09 PM

Congrats on taking the plunge, Matt! I’m glad you took the challenge seriously and I’m definitely interested to hear about your experience going forward.

Like, Baker, we haven’t missed credit cards once. In fact, we just told our story to our FPU class before they shredded 39 cards this past Sunday. 39 trouble makers off the street.
.-= Mr. Not the Jet Set´s last blog ..Save Money – Raise Chickens! =-.

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kosmo @ The Casual Observer October 5, 2009 at 9:54 AM

We have started to use our cards for almost everything. It started years ago with a gas card that paid 5% rewards. Now we have another card that pays 1% back on everything and 2% back on weekend purchases (when we tend to make our weekly shopping trips).

My commute is a 70 mile round trip, so the gas rebates add up in a big hurry. The other rebates also add up quickly. Easily hundreds of dollars a year.

Of course, it is important that you don’t abuse the cards. We pay off the entire balance every month (I don’t think I have carried a balance since 1998) and we make sure that the cards don’t result in a change to our purchasing habits. Our logic is that if we’re going to the store to buy Pampers, we may as well get cash back.

To each their own.
.-= kosmo @ The Casual Observer´s last blog ..Down to the Wire =-.

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Baker October 5, 2009 at 10:08 AM

Kosmo, I definitely understand your approach. In this article, I was trying to convey that for me, getting cash back on Pampers is not worth associating myself with the industry itself. Obviously, some may not care one way or another. :-)

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Credit Card Chaser October 5, 2009 at 3:28 PM

The question is: how far will you go to attempt to disassociate yourself from the credit card industry? Will you refuse a Visa/MasterCard backed credit card? Will you refuse to let someone buy you dinner if they use a credit card? Just kidding :)

I personally think I would not be a good manager of my money to NOT use my cash back credit card for purchases but to each his own.
.-= Credit Card Chaser´s last blog ..Stop Paying Full Price! (Use Your 1% – 5% Cash Back Credit Card) =-.

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Baker October 5, 2009 at 9:06 PM

Obviously, each person has to choose in there own life how ‘extreme’ to be. Not personally contributing to the industry with my on credit card is an easy choice. It’s one I can make now and is fully in my control.

However, right now I have very few options not to use a Visa Debit Card for example. If those options present themselves, I’m be very open to trying them! :-)

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Kyle October 5, 2009 at 9:56 AM

Really, if you think about, what use are those points anyway. I currently have a $20,000 set of pots and pans. Yes I said $20k. That is how many points it cost me to get them, I am pretty sure it wasn’t worth the danger of having a card just to get some pots and pans.
.-= Kyle´s last blog ..Freeganism – Extreme Frugality or Extremely Crazy =-.

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Baker October 5, 2009 at 10:09 AM

Woah, at least you’ll want to use them! Get your money’s worth. ;-)

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Karen October 5, 2009 at 10:12 AM

We have one cc for personal, one for business. Both get paid in full at the end of the month. The business cc points are used for credit toward the cc bill (each 5,000 in points nets $50 toward the bill) and the personal cc points are used toward airfare for our yearly vacation. As Kosmo stated, if you’re going to use gas, food, cell phone, etc., you might as well get something back for it. Yet, even I have to admit that it is sometimes easier to make a purchase when you don’t have to pull the cash out of your pocket. Still, I wonder what effect not having credit cards has on your credit rating. I’m still debating this in my own mind. Not sure I’m ready to give up the convenience yet.

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Gordie Rogers October 5, 2009 at 10:24 AM

Credit cards can also lead to higher prices in general because companies that use them have to pay fees too. I remember years ago in New Zealand a major supermarket chain stopped accepting credit cards and then lowered their prices. They became the cheapest supermarket chain in the country as a result. Interesting.
.-= Gordie Rogers´s last blog ..The Lifestyle Design Anthem: “My Way”. =-.

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Baker October 5, 2009 at 10:40 AM

Wow, that’s interesting. I don’t think I’ve heard a story of a major company who had success with this in the states. It would be cool to look more into this situation.

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Colin Wright October 5, 2009 at 11:43 AM

ARCO gas station (in Los Angeles, at least) don’t accept credit cards, and if you want to use a debit card, you have to use this wonky, usually-not-working machine out by the gas pumps. It’s ridiculously inefficient and rarely would I have enough cash lying around to make use of it, but their gas was always quite a bit cheaper than everyone else.
.-= Colin Wright´s last blog ..You’ll Never Be Philosophically Fulfilled (and That’s Okay) =-.

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Baker October 5, 2009 at 9:07 PM

There are a lot of gas stations in the Midwest that either don’t accept credit cards or offer discounted gas for cash buyers, too.

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James Schipper November 16, 2010 at 4:07 PM

That used to be common all over Southern California, too. I don’t know why they changed it (the discount for cash at gas stations), but it was pretty common up until about 20 years ago or so.

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JoeTaxpayer October 5, 2009 at 10:31 AM

As always, you’ve put an interesting spin on an old topic, and got me thinking.
When you compare it to a moral decision such as vegetarianism, you really change the discussion. I agree that the credit card issuers take advantage of people and the temptation does more harm than good. In the old days, American Express wasn’t a credit card, as all payment were due in full when you got the bill.
I respect your view on this issue as well as how you choose to eat.
Still I remain in the camp with Cosmo. It may be a matter of scale, but for the dollars we run through the cards, I’d be walking away from too much. With both my wife and me driving, the gas rebate of 5% adds up fast. The 2% back into Jane 2.0′s 529 account is free money, $8000 so far (and since this is tax free, it would take $12K to earn this). This is more than just pennies, and with 10 years to go till her senior year, it may very well be a full semester, free. This is what has created my own view on the subject. Of course, those in a different situation may not see a fraction of this.
Glad to read you today,
Joe

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Baker October 5, 2009 at 10:39 AM

Joe, thanks for the great comment. You really connect with the point of the post, even if you choose a different route. I appreciate that!

I do admit this has a lot to do with the amount of average spending and thus average rewards. Right now, Courtney and I would come nowhere close to the numbers you’ve outlined, so our decision is made a bit easier. If our situation was closer to yours, there’s no way to say for sure what we would prioritize at that point. Good discussion.

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Jason D Barr October 5, 2009 at 11:37 AM

Way to stir the pot, Baker. Lovin’ it. That being said, does this really have “a lot to do with the amount of average spending and thus average rewards”? If wrong is wrong, you might need to stand up for what you believe in, and forego some benefits to yourself as a result. Obviously, not everyone is going to have the same opinion you do on cards, but for you personally, don’t you feel it would be selling out to get a card just because you were going to rack up a ton of miles or points or whatever?

Be willing to stick with your convictions, no matter what the cost.
.-= Jason D Barr´s last blog ..What’s The Problem With Goals? =-.

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Baker October 5, 2009 at 11:21 PM

It would be nice if it worked that way, but it doesn’t always. While there are some things I would NEVER do for any amount of money, this isn’t one of them. Can I sit here and say I wouldn’t use credit cards if they gave 50% cash back? No, I’m not sure. It would depend on several things. Either way, it’s not black/white.

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Jeff October 5, 2009 at 10:35 AM

Great article.
Im glad that you mentioned sustainability in regards to your reasons to become a vegetarian, and the parallels that you drew between the two things. Why is it that those who are vulnerable (gamblers, tobacco users, credit card users) demand protection from their own habits? They can tell the their respective vices to shove it, and begin to construct a life that’s free from their destructive habits, OR they can beg for protections from themselves. They ask for regulation on credit card fees, interest rate changes, locations of gambling establishments and ingredient content for cigarettes.
Yet you have made the choice to be a vegetarian, and are not looking for the same protections from your eggplant.

Bottom line is this: If the credit card (or meat) industry was a person, and it acted like it does currently, would you be friends with it, hang out on your off time, or let it borrow money?

My guess is the answer is no.
.-= Jeff´s last blog ..Friday Links – Glee Edition =-.

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Baker October 5, 2009 at 10:42 AM

“Bottom line is this: If the credit card (or meat) industry was a person, and it acted like it does currently, would you be friends with it, hang out on your off time, or let it borrow money?”

Wow, I need to hire you to write my conclusions. This is an awesome way of viewing this argument and one I will surely steal in the future. I love it!

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Jason Wier October 5, 2009 at 11:27 AM

Here is the thing for me. I am in the same boat as many of you. I have had a credit card since I started college in 1992. I have never carried a balance. I have made much money off rewards.

I have decided that I do not want the liability if something would happen. I do not want to live a month in the past, a month behind financially. I do not want to live in bond of liability.

I like my freedom to shop at local stores that I like and use cash. I reward them with cash and not the use of plastic.

I do not mind one bit to be free. I do not spend for rewards. I do not live with liability to have rewards. I do not extend my risk for a small reward. I feel honest and real.
.-= Jason Wier´s last blog ..Contentment: Set Sail =-.

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Baker October 5, 2009 at 11:22 PM

Love it! Thanks for sharing your passionate experience. It’s right on the money for me.

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CC October 5, 2009 at 11:34 AM

Adam,

I’ve only started reading your blog recently, but I’m already loving the unique voice you use in your posts. Especially today – it is so refreshing to hear an argument about credit cards that does not focus on people being irresponsible.

I use credit cards for everything, and I have never paid a dime to the credit card company. I have never paid a finance charge, an annual fee, or any interest, and in return, I get a free 30-day loan and 1-2% cash back on all my purchases. It works for me, and I get annoyed when people preach the evils of credit cards assuming that they are a dangerous temptation to everyone who uses them.

You have put a different spin on things and reminded me that it’s not always about temptation – it’s also about supporting the companies who thrive on the temptation. Knowing the evils of the meat industry has not made me give up burgers, but I respect people who have. Knowing the evils of the credit industry has not made me cut up my credit cards, but I can see why people would. You’ve given me something to think about.

Even though I am not a vegetarian, I can respect people who don’t eat meat – as long as they don’t expect me to make the same choice.

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Baker October 5, 2009 at 11:24 PM

It’s awesome to hear that even thought you choose a different option in your own like that you are open and willing to read and join the discussion. I love that I could give you something to think about, even if ultimately it doesn’t change the specific stance. It’s the thinking and exploring that key to me.

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Eric J. Nisall October 5, 2009 at 11:38 AM

I am all for everyone choosing what works best for them because it means that you at the very least have examined your situation and made a decision, plain and simple. But, at the same time, as much as you laud a credit-card-free life, I do the opposite simply because I do believe as much as anything that they can be a great tool. Of course, I also have my issues with the industry, but overall I enjoy my cards.

Seeing Jeff’s quote makes me think of all of those surveys that try to make products and companies into “people” and analyze their characteristics. I totally disagree. I have friends who are great people but make lousy decisions regarding finances and other people but I wouldn’t not be friends with them because of those things. I also know some people who are very selfish and put themselves first but at the same time are knowledgable about certain things. The real bottom line is that you make a decision that is best for you and your family, and that is really who you need to be thinking about when those choices are made.

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Baker October 5, 2009 at 11:27 PM

I think you’ve actually swapped the importance of those two parties. For me, family is the group that you accept unconditionally. You can choose who your close friends are and who you hang-around, etc… And for me it’s this sect of my life that draws parallels to this discussion.

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Colin Wright October 5, 2009 at 11:51 AM

I feel like someone should weigh in on the other side of things, even if it is with severe reservations (devil’s advocate, you know).

I personally have used my credit card to buy everything for years. The benefits have been pretty huge in that I could buy ebooks from Amazon with one click from my iPhone (cheaper than I would get tangible versions in stores), any electronics I purchased with the CC would have an extra year’s worth of warranty, any travel plans I make have insurance included, yadda yadda yadda (Ramit Sethi has a great post outlining all the hidden perks here.

All the while, too, I’ve built up my credit so that at 24 (last time I checked, anyway), I’ve got about an 800 FICO score and if I ever need it (doubtful…will explain in a minute), it’s there.

All that being said, I also don’t buy things I can’t afford. I pay off my credit card bill on time every time, and I’m not a big spender by any means (I’m more of a minimalist, which helps quite a bit). Has using a card been good for me? Yes. If nothing else, just having a paper trail that allows me to throw away receipts and not worry about them when it comes time to pay taxes is worth it to me all by itself. Do I approve of the industry and its tactics? Hell no. It’s like the fact food industry or oil industry or any other industry that has fallen under the sway of the Iron Law of Oligarchy (those in power will do everything they can to keep that power and to get more power), and there’s no turning back when a person or industry reaches that point.

I’m convinced there will be a big changeover in how credit works in the near-future, simply because it doesn’t seem to be sustainable any more. Will this suck for me? Maybe…I actually haven’t used my card (except for ebooks) since I left the US, so it’s hard to say whether or not I’ll get back into that habit if and when I return to the States. Will it be good for the majority of people in the world? God, I hope so. I mean, it couldn’t really be any worse…
.-= Colin Wright´s last blog ..You’ll Never Be Philosophically Fulfilled (and That’s Okay) =-.

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Baker October 5, 2009 at 11:31 PM

This particular post wasn’t about whether credit cards have been good to *me* or to *you*. While I’m willing to debate the specific pros and cons in other places, I’m more focused on whether you believe there is a moral issue, here.

Do you view the industry as a positive one? Is the ‘unsustainability’ enough for you to opt-out as a minimalist? The specific answer of my situation or your situation matter not nearly as much as bringing up the discussion in general.

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H Lee D October 5, 2009 at 12:07 PM

I completely agree that the cc industry is complete slime. (I am also vegetarian.)

However, the banks are slime, too.

So are the majority of corporations that produce other goods and services.

Everything in corporate America is looking to prey on the weakest people — weakest for whatever they’re looking to make a buck on.

So I opt out of what I feel able. I don’t eat meat. I don’t watch TV. I don’t shop at Wal-Mart or Sam’s Club. I don’t eat at national chain restaurants (as a rule; won’t go into exceptions here).

But I also don’t feel comfortable with carrying more than $10-20 on me at a time, so I use my credit card to pay for just about everything. I/we keep a budget and stick to it, pay it off every month on time, etc. I know that’s not your point.

That said, credit cards are the only consumerist thing that I can think of off-hand that the responsible people can tangibly benefit from the irresponsible people. I don’t get anything for continuing to pay for my house, though the current trend is not to (whether you are able to or not). (Well, except to keep my house … but it turned out to have some major problems, and I don’t consider keeping it to be a prize…)

And ARCO everywhere doesn’t take credit cards — and they are cheaper than other stations by 3-4 cents around here.

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Baker October 5, 2009 at 11:35 PM

You bring up a lot of interesting points. Actually, going back through everything you’ve stated, I’m actually really surprised you DO use credit cards.

As for not carrying cash, why not use debit card? Or are the rewards themselves the difference maker?

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H Lee D October 5, 2009 at 11:59 PM

We get rewards on our card, but we don’t typically spend enough to make it a pressing issue one way or the other.

I don’t want to casually use anything that’s tied directly to my bank account. It feels like playing with fire to me. If something happens with my credit card number, it’s a PITA to deal with, but while it’s being dealt with, I’m not out anything (this has happened to me once). If something happens with my debit card, besides that I am instantly missing money, checks can bounce, causing fees not only from my bank (which I assume would be reversed through the course of fixing things) but from the places that the checks were written to. (No, I don’t write all that many checks — I prefer to use my credit card, because it doesn’t have my account number and routing number on it.) I really am just more comfortable being the middle man between my bank account and the rest of the world. If given the cash/debit choice, I’d choose cash.

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Nicole October 5, 2009 at 12:44 PM

Great post! (I’m new reader, btw, and loving your blog). I’ve been living without credit since I declared bankruptcy half a year ago (disclaimer: I am not a reckless spender, I’m a single mom and a student struggling with high cost of living)… and I do not miss the cards — or associated debt — one bit. I was one of those people who got lulled into the empty promises of easy credit: “don’t worry, you can pay it off later…” In principle, I agree that credit card companies are up there with the worst, most predatory aspects of consumer capitalism — like factory farms, they are morally reprehensible and I want nothing to do with them. But I have a two-fold question: Is there any such thing as good credit? (I mean, I have no problem eating ethically raised, non-medicated local meat — so what about a secured Visa from my local credit union?) and, second: How do you pay for things like PocketSmith without using a credit card? I love the program and would like to use it — but I can’t because I don’t have a credit card!
.-= Nicole´s last blog ..Rethinking twitter =-.

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Baker October 5, 2009 at 11:38 PM

Nicole, anything like PocketSmith, I just use my debit card. A debit card with a Visa/MC works the same way in 99.9% of situations. Unfortunately, if you don’t have a debit card of that nature, it might be tough.

Debit cards aren’t perfect, but they are certainly a lesser evil in my book. Ultimately, it would be nice to just have automatic transfers (digital) for everything like this. At least in my book. :-)

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Jon October 5, 2009 at 12:45 PM

I believe credit cards are killing our country, and particularly the lower class. For that reason, I don’t support them. I get the same benefits of purchase protection on my debit card when I use it as credit… I’m afraid that for some of you that pay your card off each month, one of these days something will happen one day so that you won’t be able to pay it off, and down the hole you go… Of course, it’s always up to you on how much risk you are willing to accept but for me and my house we’re credit card free… We also happen to be vegetarian… :)
.-= Jon´s last blog ..What It’s All About =-.

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Baker October 5, 2009 at 11:38 PM

Amen.

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Tyler Karaszewski October 5, 2009 at 1:32 PM

I haven’t had or used a credit card in five years or so. My life is going *just fine*. What more justification do I need than that? I don’t ask other people why they don’t have/use the things that I do. I figure it’s obvious why I own three surfboards and you don’t have any — because you don’t need and wouldn’t use them. Why isn’t the same true for credit cards?

People seem to find it incomprehensible when others live differently from themselves. This seems most true of people who spend all their time in very homogenous cultures (these tend to be people who don’t live in big cities or travel often). Everyone around them (for example) drives cars everywhere. They meet you and hear about how you don’t own a car, they’re amazed, they say they could never live that way. But you live in New York City, and they have no idea what it’s like to live in NYC, so they assume they couldn’t get by without a car, because that’s all they’ve known. If they spent a year in NYC, they’d have a new appreciation for what you can do without a car. If they spent a year without credit cards, they’d realize they didn’t even miss them. If they spent a year without a television, they’d stop offering to give one to others who’ve chosen to live without (this happens more often than you’d think).

I agree with Baker — credit card companies can stick it where the sun doesn’t shine. Not for his reasons, though — just because I don’t need them. They might as well be a “ShamWow®” or “Snuggie™” or some other piece of consumer junk that I neither need nor want. Why *wouldn’t* I go without?
.-= Tyler Karaszewski´s last blog ..Summer Update =-.

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Baker October 5, 2009 at 11:42 PM

Wow, awesome comment. Seriously.

I can relate 100% to your car comparison, as we’ve been traveling and living in Auckland (fairly big city) without one recently. It’s actually much more of an inconvenience to have a car downtown than it is to live car-free.

“Why wouldn’t I go without them?”

That’s the question for me too. Often times, people point to the rewards (obviously that why I wrote this), but for me there simply isn’t the justification. Although we have different reasons, the result is still the same. Don’t need. Don’t want.

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Nea | Self Improvement Saga October 5, 2009 at 1:52 PM

This was such a great article. I honestly hadn’t thought about it from this perspective. I’m really avid about avoiding credit cards. I had a ton of debt to pay off and I’m down to one last freaking card. There are so, so, so many reasons that I feel the way that I do about this issue, but I just hadn’t considered how my decision to cut up the credit cards fits with the general principles of my life. Thanks a ton for this article. You’ve given me a whole new way of looking at this. Great blog by the way.
.-= Nea | Self Improvement Saga´s last blog ..6 Ways to Escape Your Regrets =-.

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Four Pillars October 5, 2009 at 2:54 PM

I love my credit card.

Next time I buy a big juicy steak, I’ll charge it in your honor. :)
.-= Four Pillars´s last blog ..Support American Cancer Society – The Big Bundle =-.

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Baker October 5, 2009 at 11:48 PM
Kevin M October 5, 2009 at 4:17 PM

Good for you, Baker, for taking a stand and providing tangible reasons why you do so. I agree some of the tactics used in this industry are unsavory, but such is life in a capitalist society. While you look at this issue on a macro level, I look at it micro-economically. I won’t do business with a company that has wronged me or someone I know personally.

My wife and I use credit cards for just about everything, because it simplifies our financial life and gives us a little cash back every couple months to boot. It’s just another tool for us, nothing more, nothing less. But we are responsible users and always pay it off.

I do have one question though – do you go one step further and refuse to bank with any institution that issues credit cards? What about debit cards with a Visa or Mastercard logo?

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Baker October 5, 2009 at 11:50 PM

I tend to do a little of both macro and micro. I’m fairly loyal to business and passionate about the ones I choose to interact with, too.

While I’d like to take it a step further, I haven’t found an alternative. Debit cards are a lesser evil at this point for some required expenses. I’d like to move to direct transfers using online banking as much as possible.

Even with that, though, there is still always going to be something more you could do. For me, credit cards are the worst of the commonly used ‘tools’ in this regard. It’s an easy choice to eliminate them.

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Nancy L. October 6, 2009 at 6:26 AM

First, I have to say that I admire you for putting your beliefs into action. Many people can talk the talk, but few walk the walk, if you kwim.

Like Kevin, I am also more likely to make my ethical decisions based on a micro level-partially because there are so many challenges with sorting out all of the connections within global corporations at a macro level. That being said, I rarely take issue with any company *marketing* a product to consumers. I would much rather have the option available to make choices that others may consider “bad” for me, than to have no choice. And I take personal responsibility for the times when I’ve acted out of weakness and done things that were bad for me personally. The credit card companies didn’t force me to make stupid decisions. I did it on my own, the same as I did when I got things back under control. That’s not to say that cc companies (among others) are not beyond reproach or condemnation for some actions. Just that I don’t begrudge them the marketing end of their business.

I also think that debit cards are hardly a lesser evil compared to credit cards. They are issued by the same billion dollar corporations as credit cards, and the profit generated from their use goes into the exact same pockets. IME, my debit card actually was worse, due to the methods of accruing fees. When I went over the limit with my CC, they denied it for use and charged me one single fee. But debit cards will allow you to keep charging and then will assess you for individual fees for each transaction.

I continue to use my CC, mostly for business purposes, as I do not like to tie up my personal finance to cover expenses that will be reimbursed within a week or two. I prefer using a CC for travel as well, as I don’t like holding reservations with cash.

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Kevin M October 6, 2009 at 11:19 AM

Great point about letting the consumer have the choice, and then accepting the responsibility for making his/her choice. I’ve had problems in the past w/overspending on credit and could easily have sworn off credit cards. But I realized it was my issue, not the credit card company and have done a complete 180.

Good point about the fees on debit cards too. I just hate putting my debit card info out there at all for fear it’s going to be lost or stolen and I’ll have a big mess on my hands trying to fix my checking account. Also the reason I don’t carry cash – I don’t want to lose it. There’s no 800 number to call for lost cash.

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Neal@Wealth Pilgrim October 5, 2009 at 5:58 PM

Adam,

I have to admit that you make some great points but I personally LOVE using my credit cards,

I take tremendous (and fiendish) delight every time I use it knowing I pay my balances monthly. The company has to pay for my float and nothing (well…just about nothing) makes me happier than sticking it to the credit card man.

Do these firms prey on a certain group of people? Yes…they likely do. However, remember one thing Adam… Credit cards don’t kill credit scores……people do.

When and how are folks going to learn to be responsible? In my line of work, I see very educated folks with high debt balances and people with no education who really “get it” and don’t have any debt at all.
.-= Neal@Wealth Pilgrim´s last blog ..Boost Your Retirement Income by 23% By Avoiding These Investment Mistakes =-.

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Baker October 5, 2009 at 11:52 PM

Like I said. I’m a huge personal responsibility guy. But still… if they are ‘prey’-ing on people and you don’t have to be associated with it. Why be a part of it?

For me the ‘rewards’ aren’t enough.

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H Lee D October 5, 2009 at 6:14 PM

@Jon: If I have money in the bank, have created a budget based on my income and expenses, and stick to my budget, why would I not be able to pay off my credit card?

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Dave - LifeExcursion October 5, 2009 at 6:28 PM

You are right Adam. I hate having to argue against societal norms. Unfortunately, if you go against the grain, you are questioned more often. That definitely is the downside to such lifestyle. I believe the best part about not taking on the credit cards is the freedom from the almighty MAN taking my wealth once a month.

Good article and title.

Dave
LifeExcursion
.-= Dave – LifeExcursion´s last blog ..A Week on $20: 1/2 Success 1/2 Failure =-.

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South Texas October 5, 2009 at 11:12 PM

We collect air miles. We pay the card off every month… it still feels dirty though.

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Baker October 5, 2009 at 11:53 PM

Get clean, then. ;-)

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Foxie | CarsxGirl October 5, 2009 at 11:27 PM

I guess I’m too separated from stuff, it just doesn’t really bother me. Maybe it’s me being young, maybe I still have too much of the invincibility complex… (The car accident we had in July really diminished a lot of that, let me tell ya…) But I do use credit cards. My husband does not. I can do it and still feel the pain of spending my money, he can’t. What works for one doesn’t work for the other, and we’re both okay with how we do it.

For me, I’ve always used a credit card as soon as I got one. On stuff I’d buy anyways to build up my score. Eventually I moved to gas and have done that ever since… And when I got my rewards card, I got hooked. Never paid a penny of interest for my cards, with an exception for withdrawing cash. (Probably one of the stupidest money moves I have *ever* made.)

Now I’ve started to use it for larger purchases, as long as I have the money to pay for it anyhow. Recently I combined cash back from Ebates and my rewards card to earn an effective 4% cash back on a nearly $500 brake purchase from Tire Rack. Would I have spent the money anyhow? Yup. But I got a tiny portion back that I can now put towards paying off my other baby.

The best part is, as you say, we each have a choice. :) I can use my card, my husband can choose not to and you can not have them at all!

Bottom line: If you’re an alcoholic trying to stay sober, the last thing you do is walk into a bar.
.-= Foxie | CarsxGirl´s last blog ..Car drama happens here too often =-.

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Luke October 5, 2009 at 11:58 PM

Baker,

I am keeping my credit card until I have enough of an emergency fund to get rid of it, it really only provides a backup if we need to pay something big, like an operation not covered by my insurance.

I used to be a credit card warrior, taking rewards, paying interest, buying stuff I didn’t need. Now we pay it off every month, and try not to buy anything on it. The ultimate goal is to get rid of it.

This year has been a watershed for both NZ and Australia, credit cards are now becoming less important with the arrival of a debit card system that matches up with our EFTPOS card, no longer do you need to have a credit card to purchase online, you can do it from your everyday spending, aka “Your Money”, with you debit card.

Now people can ask the question why do I need a credit card? I don’t need it to buy anything over the counter, or online, so whats the point!

I hope Orcon have got you up and running!

Luke
.-= Luke´s last blog ..Emergency Fund: The end of the beginning =-.

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Jon Griffith October 6, 2009 at 1:36 AM

Baker, I believe that the amount of time that we spend thinking about credit cards is argument enough against them.

Credit cards = borrowing. Borrowing is very high risk. While some of you may believe that the rewards are worth the exercise, they really aren’t. I keep reading the same misconception over and over again. People say they don’t carry a balance and they pay off their cards at the end of the month. That is technically incorrect and quite dangerous to believe. If you charge $100.00, you carry $100.00 balance until you pay the $100.00. The entire time that $100.00 sits on your account, you are at risk. If you lose your job and can’t pay your bill, you get bitten by their trap, which only causes more problems.

If you have the money, why not just swipe and sign with your check card? That measly 1% isn’t going to make or break you. Add up all of the time you spend screwing around with credit card companies and you’ll probably find more value in eliminating unnecessary risk, and you’ll help stop the cycle of abuse.

@owingmoneysucks the life out of you.
.-= Jon Griffith´s last blog ..Clearly We Lack Transparency =-.

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Credit Card Chaser October 6, 2009 at 7:23 PM

Respectfully, I have a few disagreements :)

“Baker, I believe that the amount of time that we spend thinking about credit cards is argument enough against them.”

I take it that if a couple thinks long and hard about whether they should have kid(s) or not then you would just off the cuff tell them that “the amount of time that we spend thinking about is argument enough against them.” (As, I am typing this I am actually realizing that many people reading this will be quick to chime in that you are true haha)

“Credit cards = borrowing. Borrowing is very high risk.”

If you only borrow money that you already have in the bank then that = no risk

“If you lose your job and can’t pay your bill, you get bitten by their trap, which only causes more problems.”

Actually, the risk you are describing is not in using credit cards it is the risk of losing your job. Keep in mind that if you only use your credit card up to the amount that you already have in the bank then you just simply pay off the credit card when it is due each month whether you have a job or not. Now, if you continue to use the credit card after you have lost your job and you do not have an emergency fund saved up then the actual conclusion you should draw from this is that it is the fault of the cardholder that they didn’t have an emergency fund of money saved up in case they lost their job not that it is somehow the credit card’s fault.

“If you have the money, why not just swipe and sign with your check card? That measly 1% isn’t going to make or break you.”

Depending up0n how much one spends every year then that 1% could actually be quite substantial.

If the average income in the US is right around $55,000 and the US savings rate is right around 10% then that is still close to $500 every year of free money simply for using a cash back credit card and then setting your credit card to auto pay the balance in full every month from your checking account.

It’s not a fortune but hey, I certainly wouldn’t refuse a check for $500 every year just for using a different payment method for my purchases. :)

“Add up all of the time you spend screwing around with credit card companies and you’ll probably find more value in eliminating unnecessary risk, and you’ll help stop the cycle of abuse.”

It’s important to note that the “time you spend screwing around with credit card companies” is pretty much 100% caused by the cardholder using their credit card irresponsibly and not paying off the balance in full each month.

Granted, if one has a trouble with managing a credit card then they should either learn how to use their card properly or just not use it at all. On this we can agree. :)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Credit Card Chaser October 6, 2009 at 7:25 PM

* Apparently, I cant put it in brackets so the (kids) was missing from this comment:

“the amount of time that we spend thinking about (kids) is argument enough against them.”
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Baker October 6, 2009 at 7:40 PM

“If you only borrow money that you already have in the bank then that = no risk”
That’s an extremely dangerous way to think.

Your math further down assumes people charge 100% of all expenses to a credit card, which isn’t normally the case. And of course, the ‘average’ person does not prevent an increase and spending, while not carrying a balance and avoiding all fees.

Lastly, time spent on credit cards isn’t ‘pretty much 100%’ just from irresponsibly behavior. That’s a gross generalization.

I do however, appreciate you taking such an active role in this discussion. It’s great to have some much interesting back and forth.

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Credit Card Chaser October 6, 2009 at 7:57 PM

Thanks for the response.

“That’s an extremely dangerous way to think.”

Are you meaning dangerous to the points that the other gentleman was trying to make or dangerous to the cardholder? :)

“Your math further down assumes people charge 100% of all expenses to a credit card, which isn’t normally the case.”

I would hardly call my quick comment on the average US income and rewards that equal “close to $500 every year” any kind of math worth commenting on but still I am flattered :)

“Lastly, time spent on credit cards isn’t ‘pretty much 100%’ just from irresponsibly behavior. That’s a gross generalization.”

Remember, that statement is only true for the person who sets up an auto pay schedule to pay off their balance in full every month and only uses the card when the money is in the bank – you and I both know that the “average” person (aka anyone who likes to buy things) can certainly have difficulty with this.

However, to say that my statement isn’t true isn’t true (did I just say “isn’t true isn’t true”? lol) because I have purposefully qualified that statement by saying that the “pretty much 100%” number applies only to responsible credit card users that use credit as I have described above.

Naturally, you cannot take that statement and apply it to the average person because the average person is not particularly financially responsible!

Keep in mind the important distinction between saying that “the average person is not financially responsible” = true VS. “the average person can’t help spending more than they can pay on their credit card – they just can’t help it – it’s gotta be the credit card company’s fault” = blame game/never my fault/the devil (Visa) made me do it/etc. thinking. :)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Little House October 6, 2009 at 9:48 AM

You couldn’t have said that more accurately. Credit card companies do prey on the people who can’t control themselves and just force them deeper into debt. What do they care? They make loads of money and then blame the victim for their irresponsibility.

thanks for the post-
Little House
.-= Little House´s last blog ..Will Our Economy Change Towards Something Other than Consumerism? =-.

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Credit Card Chaser October 6, 2009 at 7:08 PM

“They make loads of money and then blame the victim for their irresponsibility.” Not to beat a dead horse but it actually is the cardholder’s fault if they are irresponsible and “can’t control themselves”. Sorry :)

However, I definitely agree with you in that there are companies that have hidden for waaaaay tooo long under a mess of fine print in cardholder agreements that can only be labeled as deceptive marketing so in those types of cases then the credit card issuer is definitely to blame.

Let’s not confuse the issue though and act as if it is the credit card company’s fault every single time that there are fees or penalties assessed as if it is never ever the fault of the person that “just had to have that HDTV/designer purse/new pair of shoes/etc.”

As long as a card is marketed and presented in a full and honest way and the cardholder agrees to and understands the terms of the cardholder agreement then for the most part if there are fees and penalties assessed it is likely due to the lack of financial discipline on the part of the cardholder.

I realize that it is much easier to just blame everything on the big bad credit card companies because it lets us off the hook if we make mistakes but unfortunately the trust just isn’t always so comfortable. :)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Credit Card Chaser October 6, 2009 at 7:09 PM

Sorry for my fat fingers I meant to say “truth” rather than “trust” in that last sentence :) Apparently, the truth is that I can’t type :)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Mr. Not the Jet Set October 6, 2009 at 9:20 PM

“As long as a card is marketed and presented in a full and honest way and the cardholder agrees to and understands the terms of the cardholder agreement then for the most part if there are fees and penalties assessed it is likely due to the lack of financial discipline on the part of the cardholder.”

show me one.
.-= Mr. Not the Jet Set´s last blog ..Save Money – Raise Chickens! =-.

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Robert October 6, 2009 at 10:57 AM

Gotta love the photo–oh, and the post :) Thanks Baker!
.-= Robert´s last blog ..Are Running Shoes the Enemy? =-.

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Tracy Johnson October 6, 2009 at 11:00 AM

I don’t get your rationale for eliminating credit cards. I use a credit card for every purchase I make, and I get hundreds of dollars worth of free books from amazon.com, and I have never paid a single fee of any kind. My husband uses another card for all his purchases and we just got back $1,500.00 for purchasing a car. Again not a single penny paid in fees.

And being an overweight out of shape vegetarian is unacceptable. If your actions are directed at saving the planet and end up hurting yourself are you really doing any good? I’ll answer for you: NO. I have been a vegetarian for 25 years, and I am extremely fit and slender. If you are going to eat a vegeterian diet you should be a poster child for the lifestyle, not someone who makes it appear ridiculous. Then others will want to join your efforts thus creating an actual impact on the environment.

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H Lee D October 6, 2009 at 5:35 PM

His rationale for both not using credit cards and for being vegetarian (my interpretation) both have to do with morals. Both are predatory. Meat production in the US (can’t speak for elsewhere) is done in ways that are horrific to the animals that are eventually slaughtered. Surely you know this. His rationale is based on the bigger picture of ethics, not on whether or not his body is healthy.

Credit cards: based on the bigger picture of ethics, not whether or not he can make a buck off of them.

Neither has to do with his physical gain (in money or health) — they have to do with ethics.

Finally, eating vegetarian and not being in shape is not ridiculous and actually is attractive to ignorant folks who believe that all vegetarians just eat salad and are skinny cranky folk. And if you want to be hardcore about creating an actual impact on the environment, be vegan.

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PJ October 6, 2009 at 1:20 PM

Excellent post Baker. You really hit the nail on the head. Credit card companies are like the casinos and tobacco industries. They feed off junkies. They want you to take the chance you will not become a junkie.

What do those of you who do not use or have a credit card do to reserve a hotel room or a flight?

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John DeFlumeri Jr October 6, 2009 at 2:59 PM

Credit card rewards are what the banks get mostly, not the customers!
.-= John DeFlumeri Jr´s last blog ..Hear What Congress is Up To Now! =-.

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Julie October 6, 2009 at 6:05 PM

Great, great post and comments. This is the most interesting discussion on credit card use that I have ever read.

We are in the process of paying off the two credit cards that we have and, as a rule, use debit cards. I do wish that debit cards came with the same protections as credit card. That part makes me feel a little vulnerable.

Finally, I love all the people who talk about never carrying a balance, never paying a fee, and getting cash back. That’s not done at the expense of the credit card companies, that’s done at the expense of all of those who do carry a balance and pay interest. If everyone used their cards “responsibly” the free float and cash back rewards would cease to exist.

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Credit Card Chaser October 6, 2009 at 6:59 PM

“Finally, I love all the people who talk about never carrying a balance, never paying a fee, and getting cash back. That’s not done at the expense of the credit card companies, that’s done at the expense of all of those who do carry a balance and pay interest. If everyone used their cards “responsibly” the free float and cash back rewards would cease to exist.”

Actually, that is not true – one of the biggest ways that credit card companies make money is by charging merchants a transaction fee (which can often be quite hefty). So hefty in fact that a group of 7-11 owners recently collected 30 boxes full of signatures alleging that the credit card transaction fees are too high for them and then presented those boxes of signatures to Congress.

Here is the full story: http://www.creditcardchaser.com/ever-wonder-how-credit-card-issuers-can-pay-out-cash-rewards-ask-7-11/

It is justifiable that you would think that though because I even wondered for quite some time a while ago how it is that credit card issuers can afford to pay out such handsome rewards if their only revenue source is fee and penalties. The truth is though that even debit cards are promoted pretty heavily and of course there are no interest charges that the card issuer can earn off of a debit card so they must be making quite a bit of money off of the transaction fees charged to merchants.
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Baker October 6, 2009 at 7:45 PM

While the credit card industry does make transaction fees, many of these fees are similar for debit cards. The primary difference in profitability between the two comes off the interest from cyclical borrowers. It is this difference that enables credit cards to offer ‘rewards’ that debit cards can’t.

If the rewards are truly your motivation (not saying they are) then you are benefiting from the increased profit the industry makes from interest, not from transaction charges. Benefiting off this practice is not something that interests me.

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Credit Card Chaser October 6, 2009 at 8:01 PM

Does this mean that you will refuse to use a bank that “unfairly” profits from the practice of charging mortgage interest to consumers that have one of the bank’s home loans? :)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Baker October 6, 2009 at 8:26 PM

Obviously, you are being cheeky with your ‘unfairly’ comment. However, I would and do actively avoid institutions that rely on predatory lending techniques. Don’t you?

If you could get a slightly better mortgage rate from a company that you knew generated the majority of their profits (and the ability to give you such a great rate) from making subprime loans to irresponsible individuals… would you take it?

It’s an interesting question.

Julie October 6, 2009 at 9:15 PM

Good point, CCC.

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Julie October 6, 2009 at 9:31 PM

I was curious so I did a little research. According to a 2005 report by the Government Accountability Office, 70% of card issuers’ revenue comes from interest charges.

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Jim October 6, 2009 at 6:31 PM

I respect your decision not to use credit cards on moral grounds.

I don’t agree however that credit cards or the companies that issue them are somehow inherently amoral or evil. The credit card companies are regulated by laws and everything should be in black and white in the terms of the card agreement. I don’t consider a bank to be ‘evil’ for lending people money with no collateral under a contract and then enforcing the conditions of that contract. Of course if a bank / credit card company does something that is outright illegal or unethical then that is bad, but honestly I don’t believe the majority of the industry behaves that way.

Credit cards are tools, not inherently evil.

On the the hand I do think that credit card terms can be overly confusing and may prey on people who are not really able to comprehend the details of the contract. Course if you don’t understand a contract you probably shouldn’t be signing it and then borrowing money on it either. But then I’m also sure there are slimey credit card companies out there. Some are undoubtedly worse than others. Frankly I’m not fond of Chase. But I’ve never had a problem with Amex, Citi or Discover myself.

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Credit Card Chaser October 6, 2009 at 8:05 PM

“Credit cards are tools, not inherently evil.”

That is not true!!! I just heard on the news the other day how a credit card escaped from prison in daring jail break with a handgun. The credit card started charging itself for all kinds of stuff and the gun just starting shooting people left and right – all by themselves!!!

Couldn’t resist ;)
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Mr. Not the Jet Set October 7, 2009 at 2:37 PM

Credit cards definitely aren’t evil…. but the companies that issue them – different story.
.-= Mr. Not the Jet Set´s last blog ..Two Cent Tuesdays- A New Series =-.

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Jamie @ Make Money 4 Life October 7, 2009 at 3:25 PM

I’d have to agree with you Baker. Credit cards are for habitual users. And probably 90% of the US is just that. There are so many that think that’s just the way it is, and too little people saying “Don’t be stupid – it’s a trap!” When I was younger I didn’t need credit cards, but I asked how do I build up credit and everyone answered by using credit cards. Really though, is a credit score worth being trapped in a cycle. Credit companies are just like casinos. Go there just for a meal, and everyone wants you to have fun and join in throwing money away. They’ll even act like it benefits you!
.-= Jamie @ Make Money 4 Life´s last blog ..Finding a great deal on a house =-.

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Matt @ Self Improvement Resources October 7, 2009 at 10:25 PM

“I’m going to lose it if I hear one more person say, “Well… if you aren’t responsible with credit cards, then obviously you should cancel them.” Or, “If you can’t control yourself, then it makes sense to get rid of your credit cards.”

I have to agree with you on this. The same can also be said for debit cards. These financial institutions are taking advantage of people. They do prey on the vulnerable using deceptive marketing. They are selling people a false dream. Therefore they need to be held accountable and shouldn’t always be let off the hook.

If you get caught selling drugs, you can’t get out of punishment by saying, “Well, those people should have known better than to use it.”

I understand where you are coming from on rejecting credit cards in the sense of… “FIGHT THE POWER”

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Credit Card Chaser October 7, 2009 at 11:46 PM

““I’m going to lose it if I hear one more person say, “Well… if you aren’t responsible with credit cards, then obviously you should cancel them.” Or, “If you can’t control yourself, then it makes sense to get rid of your credit cards.” ”

If by “lose it” you mean lose your sense of logic then it appears that with that analagoy you are already well on your way :)

It was only a matter of time before someone lost all sense and stooped to comparing credit cards to drugs in an eerie similarity to Godwin’s Law… What’s next? Comparing the credit card companies to Hitler and calling everyone that disagrees with you a racist? :)

A few small differences between credit cards and drugs in case you had forgotten: credit cards are legal while drugs are not, credit cards help many people while drugs help no one etc etc etc
.-= Credit Card Chaser´s last blog ..Wells Fargo Credit Cards to be Marketed to Wachovia Customers =-.

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Matt @ Self Improvement Resources October 8, 2009 at 12:52 AM

I figured that I would get that response. :)

You make the statement that credit cards are legal and drugs are not. This is true, but it has nothing to do with the point I’m making. Whether something is legal or not legal doesn’t make something right or wrong.

Doctors prescribe “drugs” that kill people (even more than the diseases they are treating) DAILY! But of course, the drugs they prescribe are “legal” even though these “legal” drugs kill more people than illegal drugs. Why? Because Big Pharma can pay off the right Government institutions… Just like the Financial companies can.

You say credit cards help people (Yes, I’ve seen all of the testimonials :) )… well, a lot of legal drugs “supposedly” do to. But they are killing a lot of people too. Just like Credit Cards are killing a lot of people financially.

That is the parallel that I’m making. The bottom line is that debt is as addictive to many consumers as illegal drugs are to fiends. Companies KNOW this and take advantage of it with deceptive marketing.

I never said that Credit Card companies should be tagged as murderers and thrown in jail. I’m just saying that they should be held accountable, just like everyone else who does bad things should be. Instead of letting them off the hook by saying that “The Victims should be more responsible.”

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Gholmes October 8, 2009 at 8:27 PM

Baker, you rock. Great post.

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Dogfood Provider October 13, 2009 at 1:19 AM

This post rocked my face off.

Seriously.

I’ve been wondering what I will do with my various and sundry credit cards. Am I in the Dave Ramsey camp – no credit cards, worry about a mortgage by finding someone who’ll underwrite your loan with a human rather than a computer? Maybe I’ll keep the oldest one open, but not use it, so I have a line of credit open for when I finally try to get a mortgage. I’ve been wondering when I will take the plunge; close them all now, before they are paid off? Close them as I pay them off? What about the damage to my credit score? Should I close the ones that are already paid off? Should I ask my mother? Should I email 238 personal finance bloggers?

But this post really hit me. The credit card companies prey on people less savvy than they are. They’re parasites. F them.

Thanks for helping me come to a decision.
.-= Dogfood Provider´s last blog ..A Name Brand I Go For & a Tip =-.

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Nate October 13, 2009 at 11:45 AM

Baker-
This is my first visit to your site and I enjoyed reading article very much! I believe that I have an excellent solution for you without getting a CC. My wife and I don’t own a CC at all but we still earn 4% cash back on our money. We have a High Yield Checking Account. These are becoming highly easy to come by now and it has worked out great for us so far! Not only does it pay 4% every month but it is on our average daily balance. Which we would earn far less if we were only earning the cash back on only the money that we spend in the month such as a CC would give you! I would be willing to bet that this method would even beat out the CC cash back almost all of the time. Especially since there are so many different rates (5% on gas, 2% this, 1% that). Just an idea for you or anyone else looking to get more cash back! And I believe it fits into your criteria of not using an actual CC. It is done through a DC which I believe you already have! I look forward to reading future posts!

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H Lee D October 13, 2009 at 4:37 PM

Where are you getting 4%????

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JoeTaxpayer October 13, 2009 at 3:53 PM

Nate -
You are confusing a cash rebate on money borrowed with cash earned on money in the bank. It’s not a choice, one or the other, you can have both. In fact, if you charged your expenses on a 2% rebate card, you would see an extra bonus in the extra interest you would earn. You realize, using the card helps your average balance stay higher, it doesn’t bring it down.

(This is addressed to Nate, I understand and appreciate Baker’s original point and his decision. Although I still struggle to understand the distinction that’s made between Credit Cards and Debit Cards. Yes, I know how they work. But they are both issued by the same entity and charge merchants the same fees. You are still dealing with the devil.)

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Nate October 13, 2009 at 6:20 PM

JoeTaxPayer
That is a good point but there is no confusion. The High Yield Checking Accounts require that you do X amount of Credit side transactions per month. For me it is 15 transactions each month in order to get the 4% rate. So I couldn’t do the 15 transactions and do CC as well. That would get way to crazy to count my 15 each month and then do some CC. Plus there would barely be any interest earned in the miniscule amount that I would be charging onto the CC. But they High Yield Checking pays on the balance in the account, not just on how much I spend like the CC would. So to choose just one, the best choice in my opinion is the Checking.

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Credit Card Chaser October 13, 2009 at 6:42 PM

If you don’t mind me asking – what institution do you have this account through (and also do you still get the 4% rate and how long have you had the 4% rate)?

I know that the current rate for the ING Direct High Yield Checking is 0.25% (that’s right 1/4 of 1%), Schwaub is 0.75%, and Univest Direct is 0.25% and all of the rest including BOA, Wachovia, etc are even less than that (according to Bank Rate)

I did find a rate of 3% with some restriction at the Advantis Credit Union here: https://www.advantiscu.org/page.php?page=12 (thanks to http://www.getrichslowly.org/blog/2008/11/17/making-the-most-of-your-checking-account/ for pointing it out)

Are you using a local credit union to get the 4%?
.-= Credit Card Chaser´s last blog ..CBS News: Credit Card Companies are like “Legalized Drug Dealers” =-.

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JoeTaxpayer October 13, 2009 at 6:28 PM

“The High Yield Checking Accounts require that you do X amount of Credit side transactions per month.”

I come here to learn, and learn I did. I’ve never heard of such an account tying the two together, now I have. Thanks.
.-= JoeTaxpayer´s last blog ..Free; The Future of a Radical Price =-.

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Nate October 15, 2009 at 2:20 PM

CCChaser-
Yes, it is a local CU. My credit union is Premier CU in Des Moines, Ia. It does still pay the 4% as well. I know my Grandfather had a High Yield Checking at Bank of the West or somewhere that was up to 5% but has recently gone down to around 4% I believe! I hope you find one that will work for you! They are awesome!!

JoeTaxPayer-
I’m glad I could help. I believe personally that these types of accounts will become more popular soon because of the appeal to the banks themselves. Every time you run your card as a Debit the bank has to pay a fee. However, when you run it through as Credit the Merchant pays the fee. These types of accounts save the banks or CU’s a bunch of money which is why they turn around and pay the interest rate for it!

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Credit Card Chaser October 15, 2009 at 2:27 PM

@ Nate
Thanks for the response! I did find a great list here too BTW in case anyone else was interested although I can’t vouch for the accuracy of course: http://www.highyieldcheckingdeals.com/2008/03/high-yield-reward-checking-accounts-by.html
.-= Credit Card Chaser´s last blog ..Annual Fees are Stealthily Getting Tacked on to Many Existing Cards =-.

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Matt with credit cards October 16, 2009 at 5:24 AM

credit cards are tools. what makes them goof or bad is the person using it. good post you got here

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H Lee D October 16, 2009 at 10:50 PM

Just thought I’d chime in again and mention that I just opened a letter from Citibank … my interest rate was just raised to 29.99%!!!!!!

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James Wright from Tech for the Masses December 12, 2009 at 7:42 PM

I’m currently on the “use rewards cards” responsibly bandwagon. Sure, in the long run they may get you. Like the casinos. But I do like the idea of getting “free money” or cash-back.

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Dollars Not Debt February 9, 2010 at 12:36 PM

Love the winning vs enjoy playing talk. I agree, the older I get-the more it is about playing & not winning. I do however want to WIN the debt free game. I blog about my path to dollars not debt.

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JN Urbanski February 9, 2010 at 1:12 PM

I’m ashamed to say, I love my Amex. I pay off my balances every month, so I don’t pay interest to other cards, but I do pay my yearly fee for the Amex. I buy gifts with the rewards points, because I put so much money on the Amex I get a huge number of reward points, so it’s worth it for me.

I completely understand why some people want to shove the reward up the company’s sh**ter though.

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Chris C. April 20, 2010 at 6:16 AM

Cool blogs! To quote you in the above “Your Jedi mind tricks won’t work on me.” I think I will use this quote when I close my remaining credit cards. Of course I will be nice to the CSR on the phone. Haven’t paid interest in over 12 years, just use them for the simple protections they offer, and so I don’t have to carry cash. Congrats on living the lifestyle you choose. I hope one day to remove myself from the rat-race. :)

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Steve in W MA September 12, 2010 at 9:52 PM

IF and only if you keep three times or more your average monthly expenses in your checking account, one of these 4% reward checking accounts will give you a better total return on your money than using a 1% rewards credit card.

the math: (for someone who spends $1000 per month):
Credit card:
1000 spending times one percent=$10, repeated each month of the year=$120 on an average expenditure of only $1000 per month.

4% Rewards Checking
$1000 average checking balance times 4%/12 =40/12=$3.33 interest earned per $1000 per month, or 12*$3.33 interest per year which is $40

(this is not quite accurate for a number of reasons that aren’t that important but if you’re mathematically savvy you’ll see that if you only have $1000 to your name then your average checking balance will end up being around $500, not $1000, but who cares for this analysis.)

The point here is that if you have 3x this balance, or a total of $3000 in the bank, then your interest earned will be $120 and is equal (disregarding taxes of course) to the rewards on a 1% rewards credit card.

So…just keep 3x your average monthly expenses (or, preferably, keep a lot more than that) in your rewards checking and use that debit card 15 times per month and you are way ahead of the game.

______

THE TRUTH for me though is that up to now it has driven me crazy to come up with 15 spending events during the month. I literally do not spend money or go shopping 15 times per month so I have opted out of this plan because I have up to now refused to sit by the gas pump pumping 3 gallons 3 times in a row, effectively costing the service station extra transaction charges, just to make my “nut” of 15 debit transactions and get 4%!

Maybe I’ll do it in the future though and every once in a while “make up” for it by buying a couple of quarts of motor oil from the station that I normally wouldn’t have bought (because I usually buy my oil on sale by the case).

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Nate September 13, 2010 at 2:03 PM

Steve-
I agree with you completely. Another cool thing about this account is that if you don’t meet the 15 transactions per month you still earn .25%. Not as awesome as the 4% but you could still earn the .25% on the checking and the 1% on the CC. A bit better then all or nothing.

Also, I do keep more than the 3k in my account. This checking account is where I have actually decided to keep my emergency fund. I have enough discipline that I never even come close to touching that emergency fund even though it is in my checking account and available. But the interest earned on that emergency fund is better then I can find anywhere else so I am capitalizing on the opportunity.

I have really never had a problem with using my card 15 times in one month. We frequent Wal-Mart to get groceries often because they are 1 mile from our house. It isn’t uncommon for me to stop there 2 or 3 times a week after work to pick up the essentials. Just doing that gets us to about 10 trans a month I’d say. Or we hit up 3 different places within a 1 or 2 mile area around our house to get the different grocery sales at each. (Wal-Mart, Fareway, and Hy-vee are all within 2 miles of eachother) So I could probably guess that we get real close to the 15 transactions just in grocerie shopping each month.

Another thing, I’m not exactly for sure how these fees are charged but I have been under the impression that the merchants pay a percentage of each sale. Not a set fee each time. Therefore whether you charged $30 in one pump or $10 in three separate ones it would still be the same percentage the merchant would pay. But like I said, I’m not exactly sure how those fees work. I don’t pay them so I don’t pay much attention I guess. I would be interested to find out though if anyone on here knows!

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essay February 18, 2013 at 11:06 AM

So I guess the choice I made yesterday:
“If I can’t eat sugar and cheese responsibly I guess I’d better not eat them at all.”
isn’t the best way to deal with this.

hmmm…

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