Credit card "challenge" update

Back in May, I wrote about a column by Michelle Singletary which quoted statistics regarding credit card usage studies. It indicated that even people who paid off their credit card balances each month spent more on purchases than if they paid cash. I have spent the past two months trying to pay cash for purchases. Here are my observations. First – I’m not used to carrying more than $20 cash!! I found I was extremely nervous being out in public with the amount of cash I needed for weekly purchases (primarily groceries and gasoline). Second, it’s terribly inconvenient for me to get to a bank to withdraw the cash I need (my paychecks are set up for direct-deposit, so no need to go for that anymore!) Third, since I have one of the credit cards where I earn a percentage back with every purchase, I would fork over the cash and mentally calculate how much money I *could* have been accruing. Fourth, since I hate, hate, hate shopping (did I mention I hate it?) budgeting a certain amount of cash is difficult because I tend to save all my shopping and do it in bunches (usually rainy days when I can’t be on the bike!) This means I need oodles of cash on one day and nothing for stretches in between. With all that said, however, I can definitely say that I have enjoyed not having to pay a credit card bill every month. I plan on continuing this experiment for several more months, to see how purchases average out. So far, my cash vs. credit expenses look to be very equal, but it will be interesting to see if there will be a difference long-term. To be continued!

Credit Card “Challenge”

I am a big fan of Michelle Singletary’s commentary in the Business/Money Management section in the Sunday paper. She was raised on a shoestring budget by her grandmother and has a very sensible approach to money management. I, too, have always been very frugal with my money and really only spend what I really perceive as necessary. Sometimes I’ll splurge, but not often! Since I have been fortunate enough to have avoided running up credit card debt, I do use a “cash-back” card for everyday purchases and pay the balance off each month. Here’s my surprise, though….according to Michelle, consumers who use a credit card (even if they pay the balance off each month) spend more than people who pay cash for purchases. Of course, as I was reading that, my mind was screaming that I didn’t fall into that category. But, she had the figures from a study to back it up. To further prove her point, she issued a challenge for people like me. Simply stop using your card for one month and then compare with previous months to see if you’ve spent less. Now, I don’t know exactly how detailed I’ll keep my records, especially since many expenses are lumped together rather than spread out evenly through the year, but I’m going to try this for the month of June. I’ll keep you posted! The link to this particular column can be found here. I think you may have to register with the Washington Post in order to view the article, though.