The Wall Street Journal
January 24, 2009
Yes, You Can Live With Less Plastic
By JENNIFER WATERS
If cash is now king, could Americans who give up credit cards live
like royalty?
Being forced to live entirely within your means may make you feel rich
in a way, but trying to get along in the modern world with no credit
at all can be a royal pain.
Besides the more frequent trips to the ATM, cash-only customers face a
much more difficult time in our plastic-dependent society when buying
big-ticket items like homes, cars and washing machines, not to mention
emergency spending for, say, a furnace that goes kaput in the middle
of winter.
"Can consumers live in a cash-only world? No," says Britt Beemer,
chief executive of America's Research Group. "But they can live in a
more cash-oriented world than they do now. That's happening as more
and more people are willing to make an effort to do so."
As consumers grapple with spending in an economy marred by rising
unemployment, growing numbers of foreclosures and what's expected to
be an unprecedented jump in credit-card defaults this year, pulling in
the reins makes sense.
Credit Diets
As Mr. Beemer says, many consumers are voluntarily putting themselves
on a credit-card-free spending diet, while others are being forced by
banks, lending institutions and credit-card companies that are
reducing limits and in some cases yanking credit lines altogether.
For those folks, the use of debit cards that won't accept transactions
larger than the available funds in an account has replaced the credit
card, along with alternatives means of noncredit payments such as
eBillme and PayPal.
"It seems that people spend less when they don't have a credit card
available," says Paula Peter, an assistant professor of consumer
behavior at San Diego State University. "With cash, your spending
ability is limited."
According to eBillme, the cash-based payment alternative, its fourth-
quarter online spending index found that 46% of customers said they
would step up their use of such methods to finance purchases. The
first-quarter index released this past week reported that 42% of
consumers have used their credit cards less in the last 90 days in
favor of noncredit payment options.
"The shift from credit toward cashlike options is the desire for
consumers to control their financing," says Marwan Forzley, chief
executive of eBillme. He sees "a clear shift in attitude" to pay as
you go.
Get Practical
So does the Federal Reserve. In its most recent data, consumer credit
fell at an annual rate of 3.75% in November. Revolving credit was down
some 3.5%, while nonrevolving credit sank at an annual rate of 4%.
Meanwhile, the most recent data from the Bureau of Economic Analysis
showed that U.S. households increased their saving rate to 2.8% of
their disposable income in November from less than 1% from 2005 to
last April.
That's good news. But though living on a cash-only basis may be
healthy, it's not always practical. "There are cases when you
absolutely need to use credit," says Mr. Forzley.
Using credit cards to fund purchases isn't a bad thing. In fact, there
are many positives to it that go beyond not having to carry wads of
cash. One can build a good credit history, which in turn can make it
easier to buy a home or car or to rent an apartment.
And don't forget about all the perks that some credit cards offer,
like redeemable mileage for air travel, hotel stays or a bevy of
discounts. Some will even help pay for prescriptions and other health-
related items.
'Big Challenge'
But using credit cards to bankroll a lifestyle that's out of sync with
your income could be destructive to your financial health. "If we keep
postponing what we pay off, at what point does that crash?" asks Ms.
Peter.
She warns consumers who want to shift to cash to do it slowly. "It's a
big challenge to change your habits," she says. Here are some tips:
Make a plan. Use credit cards to get gas or big-ticket items, but
commit to using cash when shopping for everything from food to
clothes.
Make a budget before you shop. If the fear is you'll carry too much
cash, make multiple trips.
Trash the plastic. But do keep the debit card.
Pay them off. If you keep any credit cards, pay them off in full each
month. That's not a new idea, but sticking to that resolve achieves
much the same result as using all cash without the drawbacks.
http://online.wsj.com/article/SB123284394918313137.html
On Jan 25, 7:34 am, mugglefug...@googlemail.com wrote:
> The Wall Street Journal
> January 24, 2009
> Yes, You Can Live With Less Plastic
> By JENNIFER WATERS
> If cash is now king, could Americans who give up credit cards live
> like royalty?
> Being forced to live entirely within your means may make you feel rich
> in a way, but trying to get along in the modern world with no credit
> at all can be a royal pain.
> Besides the more frequent trips to the ATM, cash-only customers face a
> much more difficult time in our plastic-dependent society when buying
> big-ticket items like homes, cars and washing machines, not to mention
> emergency spending for, say, a furnace that goes kaput in the middle
> of winter.
> "Can consumers live in a cash-only world? No," says Britt Beemer,
> chief executive of America's Research Group. "But they can live in a
> more cash-oriented world than they do now. That's happening as more
> and more people are willing to make an effort to do so."
> As consumers grapple with spending in an economy marred by rising
> unemployment, growing numbers of foreclosures and what's expected to
> be an unprecedented jump in credit-card defaults this year, pulling in
> the reins makes sense.
> Credit Diets
> As Mr. Beemer says, many consumers are voluntarily putting themselves
> on a credit-card-free spending diet, while others are being forced by
> banks, lending institutions and credit-card companies that are
> reducing limits and in some cases yanking credit lines altogether.
> For those folks, the use of debit cards that won't accept transactions
> larger than the available funds in an account has replaced the credit
> card, along with alternatives means of noncredit payments such as
> eBillme and PayPal.
> "It seems that people spend less when they don't have a credit card
> available," says Paula Peter, an assistant professor of consumer
> behavior at San Diego State University. "With cash, your spending
> ability is limited."
> According to eBillme, the cash-based payment alternative, its fourth-
> quarter online spending index found that 46% of customers said they
> would step up their use of such methods to finance purchases. The
> first-quarter index released this past week reported that 42% of
> consumers have used their credit cards less in the last 90 days in
> favor of noncredit payment options.
> "The shift from credit toward cashlike options is the desire for
> consumers to control their financing," says Marwan Forzley, chief
> executive of eBillme. He sees "a clear shift in attitude" to pay as
> you go.
> Get Practical
> So does the Federal Reserve. In its most recent data, consumer credit
> fell at an annual rate of 3.75% in November. Revolving credit was down
> some 3.5%, while nonrevolving credit sank at an annual rate of 4%.
> Meanwhile, the most recent data from the Bureau of Economic Analysis
> showed that U.S. households increased their saving rate to 2.8% of
> their disposable income in November from less than 1% from 2005 to
> last April.
> That's good news. But though living on a cash-only basis may be
> healthy, it's not always practical. "There are cases when you
> absolutely need to use credit," says Mr. Forzley.
> Using credit cards to fund purchases isn't a bad thing. In fact, there
> are many positives to it that go beyond not having to carry wads of
> cash. One can build a good credit history, which in turn can make it
> easier to buy a home or car or to rent an apartment.
> And don't forget about all the perks that some credit cards offer,
> like redeemable mileage for air travel, hotel stays or a bevy of
> discounts. Some will even help pay for prescriptions and other health-
> related items.
> 'Big Challenge'
> But using credit cards to bankroll a lifestyle that's out of sync with
> your income could be destructive to your financial health. "If we keep
> postponing what we pay off, at what point does that crash?" asks Ms.
> Peter.
> She warns consumers who want to shift to cash to do it slowly. "It's a
> big challenge to change your habits," she says. Here are some tips:
> Make a plan. Use credit cards to get gas or big-ticket items, but
> commit to using cash when shopping for everything from food to
> clothes.
> Make a budget before you shop. If the fear is you'll carry too much
> cash, make multiple trips.
> Trash the plastic. But do keep the debit card.
> Pay them off. If you keep any credit cards, pay them off in full each
> month. That's not a new idea, but sticking to that resolve achieves
> much the same result as using all cash without the drawbacks.
> http://online.wsj.com/article/SB123284394918313137.html
Actually this brings up the obvious question...what do you really
*NEED* a credit or debit card for?
Note there is a big difference between *NEED* and *WANT*.
Your thoughts?
TMT
In article
> Actually this brings up the obvious question...what do you really
> *NEED* a credit or debit card for?
>
> Note there is a big difference between *NEED* and *WANT*.
>
> Your thoughts?
What do you need indoor plumbing for? There is a big difference
between need and want, but the conveniences of modern life make
living all that much more comfortable.
-john-
--
======================================================================
John A. Weeks III 612-720-2854 john@johnweeks.com
Newave Communications http://www.johnweeks.com
======================================================================
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> >The Wall Street Journal
> >January 24, 2009
> >Yes, You Can Live With Less Plastic
> > If you keep any credit cards, pay them off in full each
> >month. That's not a new idea, but sticking to that resolve achieves
> >much the same result as using all cash without the drawbacks.
> Only useful part was the last two sentences.