There's no doubt that the wise use of credit cards can make life easier. They speed transactions, are easier to carry than cash, and allow the cardholder to make purchases before the money is in hand. However, there are also a number of advantages to not using credit cards, from an increase in financial accountability to a sense of freedom from the weight of debt.
Smaller Debt Load
The use of credit cards requires responsibility and attention to detail. Credit card issuers make using credit cards look easy but it requires judicial attention to the "fine print" like interest rates, finance charges, and late fees, among others. If a single payment on a credit card balance is missed or late, the interest rate could jump, not only on the card on which the payment was missed, but on all other credit cards in the cardholder's name as well. This could result in additional finance charges on other balances and can cause increased debt. Out-of-control credit card spending can rack up thousands of dollars in debt in a very short time. The website Creditcards.com published an article saying that carrying a large debt load can lead to anxiety, depression, and in extreme cases, even suicide.
Financial Accountability
Crown Financial Ministries advocates the "envelope system" of budgeting. Cash is divided into separate envelopes like "Groceries," "Clothing," and "Entertainment." Purchases are made using the cash from the specific envelope. This system is easy to track and provides instant access to the availability of finances. If the money is there, it can be spent. If it isn't, the purchase must be delayed until the cash is available. There is no debt incurred, no finance charges, late fees, or overlimit charges. Unlike credit cards, a cash system allows the individual to monitor his spending in real time. With credit cards, merchants may take up to three days to post a purchase. Because the cardholder doesn't see the transaction immediately, it can be easier to overspend.
Money Saved
Finance guru Dave Ramsey says, "Personal finance is 80 percent behavior." He cites a study of credit card use at McDonald's that found that people spent 4 percent more when using credit instead of cash. Using cash helps people keep more of their money. Ramsey says that when a person pays with cash, the money "feels" more personal, whereas the use of a plastic credit card is more impersonal. People hate to part with their money, but using a credit card makes spending easier.
Financial website Bankrate.com says a typical credit card purchase ends up costing 112 percent more than if cash were used, and the typical American family pays about $1,200 annually in credit card interest. That money could be used to take a vacation, pay for other expenses, or put in a savings account for a rainy day.
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