by Michael Smith
Cash or credit? For more and more Americans, who have either already overstretched themselves on credit cards, have gotten rid of them, or are just trying to manage their spending better in the tough economy, the answer is increasingly the old-fashioned one, namely cash. No, not Johnny, the other one.
Retailers like Wal-Mart, Target, and other are beginning to notice, so they report, a marked shift away from credit cards in favor of cash and debit cards. A big factor is less credit available as major card issuers cut spending limits and raise fees even for customers who pay their bills on time.
The shift ends Americans' long love affair with credit cards and is one of the changes in consumer behavior that has emerged since the financial meltdown that could depress consumer spending this holiday season and affect shoppers' habits long afterward.
Particularly during holiday seasons past, shoppers could count on a pile of plastic to give them the extra financing needed to splurge on presents before they had to face the bills in January or later.
But even when the economy recovers and credit loosens up, analysts say Americans – shaped by what could be a deep and long-lasting recession – are likely to stick with buying only what they can afford just as their parents or grandparents did after the Great Depression.
This is, definitely, not a bad idea.
Personally, I refuse each and every credit card as I would not have one on any account; no pun intended here. I use a card, yes, but a debit card, which means that I cannot spend more than I have in my bank account. I also would never spend more than a certain limint per month from that anyway.
Why? Because I like to have a safety net and a little financial cushion there for the “just in case”, in the same way as our parents and grandparents did with the money they kept hidden in various places.
Although I have my money in the bank one can but wonder in today's climate as to how safe that actually is and whether a good sturdy safe somewhere at home and keeping the stuff there in coin and paper under lock and key might not be a better choice still.
As I said, I either pay by cash or, in most cases, for convenience of carry, and security, by debit card with chip & PIN. Monthly payments for utilities are going through the banking system by so-called direct debit. This works out cheaper than actually going to a payment center, like the Post Office, to pay those bills or to use check. In fact here we get charged extra if we pay by any other way than by direct debit.
I buy, as said, everything that way for like to know what I have bought and what I have spent and to know that I am not going to be hit with a big bill with the Gods only know what interest added to it. Use cash or debit card but no credit and loans. Cash still is best but debit card is basically cash in plastic form.
Credit cards, on the other hand, can be compared with a loan agency in your pocket. And, just like a loan agency, they charge you the earth for the money they, basically, lend you.
Cash may be seen as old-fashioned and the biggest problem is that cash is also, at some places, seen as dubious, it still is, in my opinion, and, it would appear, also the opinion of a lot of other people, especially in the US, better than credit card.
In this country, that is to say, Britain, though you may no longer use checks, for instance, in most stores in order to pay for your purchases. Is has to be either debit or credit card with chip & PIN. Or, obviously, cash. They still take that – for the moment. In fact, even though cash's death has been foretold so many times, I do not think cash is dead by a long shot. As fas as I can see it is coming back in fashion in many places, and that with a vengeance. Good for it as well.
© M Smith (Veshengro), December 2008