Q&A: We have a no fee 2% cash back credit card. Is this better than using cash?
by Ryan Loos on Sep.14, 2009, under Q & A
It is time for Q & A. These are questions that I have received from various speaking and teaching events that we do throughout WNY and Southern Ontario. The question for today deals with using cash vs. using a no annual fee reward credit card. This question is often asked as we teach not to use credit cards and if you are an American with a good debit card there is no need for you to have a credit card. My wife and I have been without a single credit card for over 4 years and have not missed it at all. The underlying basis of this question is that credit card companies have done such a good job selling rewards that we as consumers believe that we are getting something back on the dollars that we would have spent anyways. Well the truth is that the studies show that credit card users spend on average 8-12% more per purchase than if the would have used cash. If you are eating out and use a credit card you are more likely to spend 15-20% more than you would have if you were using cash. If you do the math the 2% cash back is not enough to out way the greater amount that you spent by using a credit card. Cash is emotional. It is harder for us to spend cash than it is to swipe the plastic. Let get back to the basic and start using cash envelopes again like our great grandparents did! Oh, and the argument for the convenience of plastic over cash…. is convenience worth 8-12% more per purchase to you?
