To be fair, if I was living paycheck to paycheck using my credit card to pay non-utility bills would have to stop. Behavioral studies show that people who use credit cards spend something like 12% more than they would if they use cash.

I would conclude by saying that if you don’t pay your credit card off in full each month, no amount of incentive points are worth it. They’ll never amount to the money that you are dropping in interest.

Like I said man, you have a great head on your shoulders and as long as you stick to your commitment to slay the dragon once it finally bites you, you will be fine.

I totally understand the concept of spending cash if you have it. This is why we only grab the envelope we are going to use for the day. (When you know you have $200 for groceries you are less likely to spend it on other things.)

I used to be especially bad once I broke a $20, then it just disappeared before my very eyes. You also seem to know a lot about Dave Ramsey’s plan which is great. I guess you know what he says about being able to get a mortgage without using a credit score so I will leave that one alone.

Anyone that enjoys punching debt in the face is a friend of mine!! Keep up the great work dude!

I personally have found that I operate the other way around. If I have cash in my wallet I spend it. It’s that simple. I don’t have the discipline to keep a couple bucks in my wallet, cause I will always end up stopping by 7-11 and gettin a big gulp. I totally see the benefits of the envelope system. But I really like being able to use quicken to track my expenses (which I use to make sure I am staying in line with my budget). If I was using cash purchases for all my $5 charges that would be a ton of receipts I would have to keep to see exactly where and how much I spent on certain days. I guess you would argue that I could have the same benefit of tracking in quicken if I used a debit card, but then that again brings up the point of “plastic is plastic”.

Overall, I guess I can’t really argue with you because your beliefs are obviously going to work. Your way eliminates the possibility of racking up debt. I made a comitmment to myself that I would rid myself of credit cards the day they bit me in the a$$, like a late payment or penalty fee.

I also know that having a good credit score is important to my future goal of purchasing a home. I know that the only way to have a good credit score (or as Dave calls it the I Love Debt Score) is to continue borrowing money and then paying it back in full. You and I both know that when one goes to take out a mortgage credit score is a HUGE factor for the interest rate you will receive. It hasn’t always been this way, but unfortunately, especially during this economy, a good credit score can save BIG money. The disciplined use of my credit card will help raise my credit score and ultimately save me thousands of dollars on a mortgage.

p.s. I love finance too, and I think I love have intelligent debates about it as well. We both have the same objective, just slightly different ways to get there!

Spending cash causes a little more frugality when buying anything. You tend to question your true need for anything you are thinking of purchasing. I am certainly not saying that someone disciplined enough to pay off their balance each month is in great danger but there are still risks like the ones I stated above.

My question was only intended to find out why you would take on risk for the small benefit you might receive. You have to admit that there is a possibility that when you are spending with those rewards cards you can spend even more simply because of the fact you feel you are getting something for free. (Which is what they want you to feel. They didn’t create that program just to continue giving credit, people already are standing in line to do that daily…they were also looking for an increase in sales on each purchase as well.)

With what you might have saved by using cash or a debit card from your checking account, (without a little incentive in the back of your head telling you to get those rewards), you could have also funded most of your airline ticket? What are the net rewards and what is the risk in order to get those rewards?

“Both are plastic and have the same psychological impact on me, because I treat my credit card like a debit card by using it, there literally is no difference between the two when you pay the balance in full each month.”

The difference is your annual fee
plus the spending incentive causing you to add a couple more dollars to your purchases. (Again I am not saying YOU do, I am just saying A LOT more activity happens in the brain when you are spending cash.) Credit card companies use statistics and research to formulate their next GOLD Card, Rewards Card so that they can maximize their return on investment. You are their investment vehicle and when/if you mess up or quite simply life happens, they benefit.

I am certainly glad you are not the average Joe, I could tell that from reading your blog. You have discipline but just remember life can bypass discipline at any moment and when that happens survival decisions are made and discipline slowly starts to disappear. For people with debt or the ability to use debt that becomes a nightmare waiting to happen which is even worse without a good savings account.

I just wanted to say that I wish I would have had it as together as you when I was your age. I admire your position and attitude. Most of the people I know that are your age are not thinking about Roth IRA’s and finance in general. I found your site over at Budgets are sexy, and have enjoyed reading your stuff. Please forgive the length of this reply, I just LOVE talking about this stuff. PEACE!

I totally agree with all of your points for the average Joe, but with proper discipline it is pretty hard to argue that a credit card with incentives is a bad thing. Thanks again for throwing out your opinions. It’s always good to have a constructive debate.