The Psychology of Credit Cards

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I've used credit cards non-stop since I got my first. The reason is just because I don't like carrying cash. I spent no more than I would anyway, payed them off every month, and when I lost my job I stopped spending on anything that wasn't necessary. Of course, I did still spend money on the necessary, and that has put the wife and I in debt over the past two years. Now that I have a job, though, we'll be paying that off in a few months. Even when we went in debt, we did it carefully and aware of what we were doing.

 

Thanks for the link, most interesting. Of course, every time you use a card somewhere you know data is being collected. I still have my Tesco card from the days I lived in Scotland and used to get discounts and coupons based on my purchases.

Regarding credit cards, I'd say that no matter how you look at it spending money you don't have is always a really bad idea and you always end up paying more for it.

By the way, do American cards have chips yet or do they still have those magnetic stripes? I'd rather carry cash than use a card without a chip and a PIN.

 

Interesting.

The good question is whether we lenders (I work at one of those evil credit card issuing banks) are here to make money for our shareholders (who are real people too) or to protect people from spending more money than they should. It's a tougher balancing act than you might think.

 

I feel the need to monitor my spending properly and therefore mainly use cash, I have a bank card which I use when I don't have cash available. I do not own a credit card and have not really had much use for one either as of yet.

 

You certainly raise a valid point. And every business runs with a line of good credit. The problem I have is not so much with the credit cards but with the money itself. Banks and lending institutions pay next to nothing to get the money that they lend out. Then when less savvy people want to save money with you, you pay them next to nothing for it, and lend it out at 10 times the rate, to a person who as big a sucker as the one saving the money with you. Then banks complain about the national savings rate, and that everyone owes too much and no one wants of "save" anything, but lenders have made a billion dollars off both ends in the process...Actually, now that I think on it...you guys are pretty smart.

Actually, though in this instance, the guy took out a second mortgage on a remodel. Most people don't have a spare 30 grand in their checking accounts for a remodel, so a second mortgage could be a good way to work it, if the interest rate was low enough. The problem is that the housing market is cratered, so the guy got stuck. But in a normal stituation, he could possibly have gotten the 30 grand back out of his house in the divorce process, and paid his credit card as well. But he got screwed instead.

 

My family is the same way. I have one card that gives me 3% back on gas, that I use for gas. I have another card that gives 1% cash back on everything, and I use that for general purchases.

The final card is a Discover card that offers certain benefits at certain times of the year. We're in the spring now, so you get 5% cash back on purchases from home improvement stores. In the summer, you get 5% back on amusement parks and hotels. (So when my family goes to Busch Gardens this summer, we'll pay for the admission by using the Discover Card.) The real bonus for the Discover Card is that in the winter months, it's 5% off at grocery stores. (Up to a maximum of $500 per quarter - so we only use the Discover until we hit $500.)

However, the general rule of "don't charge it unless you were going to buy it anyway" still applies. I'm not going to Busch Gardens because I'm getting 5% back from Discover.

I agree - that's why I say only put it on a card if you plan on paying it off at the end of the month, and it is a purchase you'd make regardless of the method of payment.

It depends - debit cards require a pin number to activate them. Most credit cards just have the regular magnetic strips without a chip. (Although there is a new card out by Visa, that identifies your finger print with a chip in it. You have to hold the card with your thumb over the sensor when you swipe it for it to work.) Visa also has a card with your picture on it, and if the sales clerk is doing their job right, they should look at the card to make sure the person using the card looks like the person making the purchase.

I think it's pretty obvious that at the time they borrowed that 30 grand, the guy didn't know he'd be getting divorced any time soon. If they had even stayed married another year or two, the housing market may have recovered to the point that they would have been able to recoup a significant portion of that investment. But yeah, you decide when you get married, but you don't always decide on when you get divorced - and this guy got screwed.

 

Speaking of values regarding banks, at least here in the US....

http://www.msnbc.msn.com/id/21134540/vp/33208714#33208714

http://www.msnbc.msn.com/id/33224880/ns/msnbc_tv-the_dylan_ratigan_show/