Interesting article by money claiming that people who use plastic spend more.  I wonder is that a cause of credit card debt or an artifact of the credit card usage?

 First off, if you notice many PF bloggers use CC extensively and none worry about late fees or 25% interest.  Some like Nickel have automatic debit to pay bills.  Actually multiple do, so they never have a late fee or interest.  Which makes me wonder, all these people paying late fees, is it a symptom or a reason they are in debt?  Do people who are responsible credit card users have late fees? I don’t think so.  But the majority of people are NOT responsible credit card users, meaning they carry a balance so of course they are the types to get hit with late fees and interest rates.  So cause or effect?

Second the article states people using cards spend $7 versus $4.50 at McDonalds, and 30% bigger bills when charging. But are these overspenders to begin with?  Do they pay their balances off in full or are these people who always carry a balance and live a lifestyle far above their means?  Come on, we all know TONS of people who just charge and charge and charge and then declare BK.  Or can barely afford their minimum payments on a credit card.  But what about those who can afford what they charge?

Third, an experiement showed credit card users we willing to pay more for a Celtic ticket than those paying by cash.  I wonder again are these people who charge without care though?  People who overdraw on their bank accounts, bounce rent checks and can’t pay anything on time?  There is no distinction between those who charge and can’t pay and those who can.

Fourth, Jason Corbett talks about charging a $1400 lawn mower, but now will go do research and get a $1000 mower.  As someone who responsibly uses a credit card, I have to say I’ve NEVER walked into a store and bought a large purchase without first researching it.  I would never walk in and charge a lawn mower I knew nothing about.  So his “different” way of thinking now that he doesn’t use credit is the “method” DH and I have “always” used. 

Fifth, the article suggests that the credit line goes to a person’s head.  Higher the limit, the bigger the balance.  Again I have to point out these are people used to living beyong their means.  People who even CARRY balances!  Ouch.  I couldn’t ever imagine carrying a balance.

Finally, the TRUE link between credit card debt and overspending.  It’s the person.  Why?  Becaues the article admits that people who are ex-credit card users can’t often even use a debit card without overspending.  They have trouble balancing their checkbooks and spending money wisely.

Which tells me that it’s not the method (credit versus debit) it’s the person. They can’t control their spending period!  If you can overdraw a checking it means you’ll likely run into CC debt. It means you have no idea how to practice self-control.  That as a person you are used to living beyond your means.

I think it’s best exemplified in the mindset change of people using credit irresponsibly into that of people using credit responsibly.  That I would never have charged anything without research is how people using cash “now” think.  I wonder what percentage of people never carrying a balance have ever overdrafted their checking either?

I’ve never had an overdraft in my checking account.  Although my roommates have bounced checks to me, I still covered rent because I keep such a large buffer.  I’ve never bounced a check or not known to the dollar how much I’ve spent.

 So this article suggests that credit cards are causing overspending. I have to argue it’s not the person not the method.  And to those who had to give up credit cards and debit cards I applaud them for knowing their limits.  Realizing any plastic, including debit causes them to spend more.

But it means that it’s not the plastic causing the damage (CC% versus overdraft fees, no money in checking account fees), it’s the overspending of a person who lives way ABOVE and BEYOND what they can afford.

I won’t quite give up my plastic yet, otherwise I wouldn’t have earned nearly $600 in CC rewards these past two months. And by the way, yes I charged about $12k on the credit card and yes I paid it off and boy did it hurt.  I know some will chime in why not pay cash? 

Well I like my 5% back, and no university gives a cash discount, I already asked them over the phone. So tell me how better to get back money than charging $6500 and $5500 on our credit cards?  It’s going to be paid one way or another, and it’s not an impulse purchase, it’s MBA tuition.  So when someone figures it out I’ll use their method. But until then I’ll use any money saving technique to help pay for my DH’s program.  Every penny counts and I think that frugal mindset is what most responsible credit card users have in common.  We’re thrifty, so we know how much we’re spending, have a predetermined spend amount, and know the balance of our credit cards, checking accounts, and investments at any given time.