Wednesday, January 21, 2015

The Plastic Debate...



So as a money saver I do enjoy catching Dave Ramsey on the radio from time to time to hear what he has to say. Obviously, this guy has some aspects of his program that really work for people. If you do not know who he is you can check him out here: http://www.daveramsey.com/home/. He's all about becoming debt free, and in general, I agree with his message!





One aspect I have heard of his program on the radio is to have people stay away from plastic, i.e. credit cards and debit cards. There is a ton of research that states that people do tend to spend more compulsively when using plastic and I believe it in terms of the general public. However, there are some great advantages to using plastic as well.


Advantages:


1) Instead of cayring a bunch of cash around it is much safer to carry around a card or two. If stolen or lost you can deactivate them and they are widely accepted.

2) Many credit cards and debit cards offer reward programs. For me, I make around $50/month in credit card rewards depending on what type of promotion is offered for the particular month. Right now the 5% cash back with my Chase card is for groceries and I am going to buy those regardless. The Chase Freedom card has worked very well for us



3) If you have a disputed charge with a credit card you can simply call the company and they are likely to work with you. For example, friends of ours bought furniture from Ashley furniture that arrived damaged. They returned the furniture Ashley wouldn't work for them on a full refund After calling Chase our friend's payment was stopped and they were not charged.

4) It is really the only safe way to make purchases online and there are vast savings to be had on the world wide web.



5) With some rewards programs you can get gift certificates worth more than the cash back would be worth which are great for when you need to eat out when traveling or giving as gifts.

6) It builds credit if you use them responsibly.

7) It is easy to save purchase information by just checking your account on-line or on an app on your phone. For me this organizational ability great.

Some tips for not overspending using credit cards.

1) NEVER CARRY A BALANCE!!! I went all caps there on purpose. It defeats the whole purpose if you are using it as a payday loan.

2) Move cash from one account to another as you make purchases. Have the second account set up as the automatic payment account for your credit card and then you are only spending cash that you do have.

3) Pay monthly bills that have to be paid anyway automatically with credit cards. Heat and electricity are prime examples. You might as well take the kick back that you would not get if paying out of your checking account.

4)Do not keep it in your wallet if you are a super compulsive shopper. Bring it with you for outings to the grocery store and only buy items that are on your list.

5) Have only a couple of credit cards that are different. Do not get two different Visa cards as they may not both be accepted everywhere. I personally break this rule a little as I have two credit cards that are Visas and two debit cards that are Master Card (more to come on the debit cards later).


All in all, for the right user credit cards are great secure ways to make purchases. Like anything, they do take some will power. For me personally, I feel it just as much if I swipe the card as if I pay cash because I know and understand that they are all coming from the same pot of money. If your self control is in place credit cards can actually be a way to save money and work on becoming more frugal!

Thanks for reading. If you enjoyed the blog please subscribe by entering your email into the email update box on the right column.

FFF

2 comments:

  1. I think that what Dave Ramsey recommends about credits is great advice IF you have a problem. I did for some time and ended up messing up because of it. Also, he does recommend having a debit card, but using cash primarily for purchases.

    I have the same Chase card as you and I love it! One thing taht you cana lso take advantage of is paying the balance online before the due date which in turn gives you even more opportunities to gain cash back rewards. Also, if you shop through some of their online vendors (such as Sears), you get even more rewards. Our family uses vitacost often and they have 5% cash back using Chase. We were going to spend that money anyway, so we earned even more.

    Like you said, the danger is in overspending. One way to be a Frugal Father is through a monthly written budget. In doing that, my family has been able to save a bunch of money on a smaller salary with my wife not working by telling our money to where to go, as Dave would say. If you ever wanted a guest blog on the importance of budgeting, I would be more than happy ;)

    I am looking forward to seeing more posts in the future!

    ReplyDelete
  2. Hey Matt, can you elaborate on the paying it off early? Do you use that as a personal budgeting technique or are you getting an extra kickback? I would have to look at the pay off between that and the interest I get in my "special" checking accounts (Blog post to come later about that).

    I completely agree with your written budget because it doesn't allow for that overspending that you are talking about and feel free to shoot me that budgeting information any time!

    Thanks for reading and it is great to hear from you.

    ReplyDelete