Credit Controversy

An article in the New York Times finally got me to write on a topic I've mulled over for a long time--the credit vs. cash debate. The article talks about women who pay for big-ticket items (or something smaller) with cash instead of credit. The underlying theory for this behavior is that some women want to keep such indulgences off credit card statements, so that their spouses or significant others would not find out (and disapprove). Some women use cash so that they won't feel the guilt of seeing a large expenditure on the credit card statement.

I know that a lot of you won't like my opinion, but that's exactly why I prefer credit.

Keep in mind that my preference is NOT the way to go for a number of people, such as those with a history of credit problems, those who do not at any given moment know how much money is in their bank accounts, and who have problems with controlling their spending (including impulse shoppers). If you fall into this group, or think you do, stick with cash. Otherwise, you run the risk of spending money that you don't have. Don't EVER run up a credit card debt unless it's a life-or-death, on-the-verge-of-homelessness situation.

Before you start booing, just hear me out. For those who exercise fiscal restraint and sound financial practices, there are good reasons to use credit instead of cash in the ordinary course of business.

First of all, I minimize the amount of cash in my wallet for safety reasons. I don't live in a good area, but sometimes I dress up. On top of that, strangers who believe in racial stereotypes would assume that I carry a boatload of cash on my person (they'd know better if they saw what my car looks like). Hence, whether I like it or not, there's always a risk that I'll get robbed. In fact, months ago, I was told that someone was robbed at gunpoint or knifepoint a block away from where I live, and then there were various violent crimes that were serious enough to make the local news. That's reason enough to be concerned. I take many precautions to protect myself, and one of them is to carry as little cash as possible. If I do end up getting mugged, I can cancel all my cards and not lose much money.

Second, the credit card statement operates as an accounting tool as well as a spending deterrent. If I pay for various things with cash, sometimes I lose track of what I'm using the cash for. By paying for most of my needs and wants with credit, I'd be confronted with a list of all spendings at the end of the month, indulgent or not. There's no getting away from it, no elaborate ruse. Seeing all the expenditures on one document helps me spot the "problem areas" easily, and the guilt induced by the large dollar amounts is enough to make me change my ways for the following month.

Finally, I like to take advantage of incentives from the credit card company. I see the credit card as the equivalent of writing out a check--I don't ever charge an amount greater than what's sitting in my bank account. Since I pay for my credit card bill with cash from my bank account, why not accrue points while I'm at it? Credit card companies hate people like me because I always pay my bills in full and on time. They don't make any money off of me, and I won't let them.

Of course, almost every good thing has its caveat. Credit card fraud and identity theft are huge problems, and unfortunately, I've had to deal with it. I'll discuss this in detail another time. Meanwhile, be very vigilant in checking your credit card statements for any suspicious entries. Some thieves start with small purchases, then they move on to big ones if they discover that you aren't paying attention, so nip the problem in the bud before it grows. Also, check your credit report for strange accounts that you didn't know existed.