Hot Trend: Ditching Credit Cards

Some are sick of getting nickel and dimed—or $39 and $39ed, as the case may be. Consumers are not buying the usual credit card company games. So they are only purchasing items they can actually afford, right now, using debit cards or cold hard cash. In fact, it was reported back in May that Visa Inc. (Stock Quote: V) has seen its “total dollar volume of purchases” made with Visa-branded debit cards rise above that of the company’s branded credit cards.

There are, of course, many different roads leading to the same city—and there is more than one way to live free of credit cards’ tentacles. You can quit cold turkey and never go back: that’s the Dave Ramsey method. Cash or debit cards for everything. You live as if credit cards are not even an option, as if you do not know they exist in the marketplace.

And then there is CNBC host Suze Orman’s recent crusade against credit card use. Unlike Ramsey’s zero-tolerance policy for credit card use, Orman is only asking her fans to pledge not to use their credit cards for a certain period of time. Her campaign works by sending a message to the credit card companies by temporarily starving them. It’s not a lifestyle choice; it’s a battle cry.

Why Dave Ramsey Hates Credit Cards

Personal finance guru and talk show host Dave Ramsey sure hates plastic! In an article on his Web site, he clearly explains why he favors cash over credit card use:

1) Credit card users tend to spend more. “A study of credit card use at McDonald’s found that people spent 47% more when using credit instead of cash. This is money you could have saved!” his site claims.

2) Credit cards promote weak behavior. “Personal finance is 80% behavior. You need to cut out habits that make you spend more. You do not build wealth with credit cards. Use common sense,” he writes.

3) Credit card companies are smart—probably smarter than you. “When you play with a multi-billion dollar industry and you think you're going to win at their game, you are naive. You cannot beat the credit card companies,” Ramsey warns.

Ramsey also has a “debit card policy” posted on his Web site: “We do accept debit cards, but we do not accept credit cards—never have, never will. Dave personally uses debit cards for purchases, and that’s the advice he gives to America. […] We hate credit cards, and quite simply, we don’t want to sell you anything unless you can actually pay for it with real money. Anyone trying to use a credit card on our site has some serious integrity issues, and we honestly don’t want to do business with people we can’t trust. So don’t try it!”

Pretty unusual to have that level of commitment to the cause.

Suze Orman’s “Back to Cash Movement” Takes Hold

But Ramsey isn’t the only public personal finance expert trying to get America into credit card rehab. Suze Orman, a CNBC host recently interviewed by MainStreet, has launched her “Back to Cash Movement”—self-explanatory title, really.

On the movement’s Web page, she asks fans to pledge to use cash only for a certain period of time (1 week, 1 month or 6 months). Unlike Ramsey, who simply opposes credit cards unconditionally, Orman’s movement is designed more to “make a statement” and stick it to the credit card companies who have shafted American consumers with higher interest rates and slashed credit lines.

Real World Experience

MainStreet wanted to hear from someone who has been using only cash for a while. We spoke with Brooke MacDonald, a 28-year-old public relations professional who lives in Annapolis, Md. She has previously been featured on CNN Money for her credit card-free lifestyle; MacDonald told us she broke free from plastic a year and a half ago. She was inspired, in part, by Suze Orman.

“I think Suze Orman is a genius,” MacDonald told us. “I wish I had her books back in college and learned better management skills for money. I think her ways to save are simple and her information is very straightforward for the everyday person, especially women who often rely on others to ‘watch’ their money.”

How has her life changed, post-credit card? What are the perks? “The benefits are that I finally feel free, day by day. I am no longer dreading the debt and opening the bills. I have taken responsibility for it and pay off the most I can every month. I have really learned to budget and know how much is in my bank account at all times,” she explained. MacDonald said she is “always” monitoring her balance, subscribing to text alert services that send her balance information directly to her phone. She is still in about $10,000 of debt, but has not slipped up—no new credit card charges since she went cash-only.

“I knew that once I went cash only—this was my only choice. It’s an effort every day,” she told us. MacDonald does not even carry a credit card in her wallet. It’s cash or nothing at all.

She also sees a philosophical side to all of this; a return to cash was her wake-up call that material possessions should come after happiness: “I have cut back on my eating out, visiting out of town friends and the frivolous items like pedicures, massages and things that I don’t need but were fun. I have learned that I need to live within my means at 28. I don’t need to keep up with the Jones’ and I should be happy with my life. Things don’t define who you are, just because you may or may not wear $200 jeans isn’t going to make your life better, but being happy with yourself is what matters.”

Incidentally, Orman’s famous mantra is “People First, Then Money, Then Things”—sounds like MacDonald is living that mantra as well.

“I was filling my life with things—instead of filling the voids,” she explained.

MacDonald isn’t swearing off consumerism altogether; she’s just taking it much slower. “I love nice things don’t get me wrong—I’m just going to pay cash and earn them instead of getting them when I want them.”

I couldn’t have said it better myself. Earn what you really want; don’t take a shortcut that may end up costing your future self.

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