Credit Cards and Financial Behavior- any correlation?

[Anonymous]

I was wondering if anyone had any studies or research that tied credit card usage and churning to behavior/individual thought about having cards to begin with.

I ask because I started trying some of the Dave Ramsey method of cash Envelopes and I found myself to be much more of a penny pincher than I was with a debit/credit card. Granted it's only been a few weeks and I am actively working on paying down debts, but still it was an observation I had that psychologically I had a tougher time justifying more expenses using cash than I did with a card, even going out of the way as to avoid spending or using numerous coupons to save.

I was wondering if there was a correlation. Do you feel there is one?

[Anonymous]

Those with higher credit scores tend to use their credit more responsibly.

Just look at individual card statistics on Credit Karma.

For example, here are some stats for Capital One Quicksilver

https://www.creditkarma.com/reviews/credit-card/single/id/coCash

Sample size was 964.

Check out other cards that may have stats.

[RonM21]

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@Anonymous wrote:

Those with higher credit scores tend to use their credit more responsibly.

Just look at individual card statistics on Credit Karma.

For example, here are some stats for Capital One Quicksilver

https://www.creditkarma.com/reviews/credit-card/single/id/coCash

Sample size was 964.

Check out other cards that may have stats.

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That makes a lot of sense. For those of us who had or are repairing credit, it was usually some recklessness in how we handled our financials that got us into that situation.

[UncleB]

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@RM21 wrote:

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@Anonymous wrote:

Those with higher credit scores tend to use their credit more responsibly.

Just look at individual card statistics on Credit Karma.

For example, here are some stats for Capital One Quicksilver

https://www.creditkarma.com/reviews/credit-card/single/id/coCash

Sample size was 964.

Check out other cards that may have stats.

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That makes a lot of sense. For those of us who had or are repairing credit, it was usually some recklessness in how we handled our financials that got us into that situation.

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+1

Recklessness is the cause of problems in many cases; other times it can be due to situations beyond our control, such as medical expenses or a job loss.

I'll add that I was once told by the owner of a small shop that credit card merchant fees were significant (for him) but that people who paid with plastic tended to spend more on 'extras' that cash/check customers didn't pick up.  He said that for him the extra sales (and add-ons) made up for the fees.

I'm fairly disciplined (I use coupons and tend not to impulse-buy) but when I'm spending cash even I'm a bit more thoughtful about purchases. 

That being said, when I "do the math" I always find that I still do pretty good with cash rewards. 

[CatOfSpades]

Recklessness and not paying attention was always my problem. I found that actually following my budget and interacting with it throughout the month (by logging all of my transactions) has solved the majority of my spending issues. I'm still debating on what to do with extra money - right now I just spend it. LOL! 

[Anonymous]

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@Anonymous wrote:

I was wondering if anyone had any studies or research that tied credit card usage and churning to behavior/individual thought about having cards to begin with.

I ask because I started trying some of the Dave Ramsey method of cash Envelopes and I found myself to be much more of a penny pincher than I was with a debit/credit card. Granted it's only been a few weeks and I am actively working on paying down debts, but still it was an observation I had that psychologically I had a tougher time justifying more expenses using cash than I did with a card, even going out of the way as to avoid spending or using numerous coupons to save.

I was wondering if there was a correlation. Do you feel there is one?

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For myself personally, it was the opposite.  When I use my cards, I am very careful and account for all of my spending.  when I use cash, I burn through it like fire.  I have never done a cash envelope thing though.  I perfer to use credit cards and use mint for my "envelopes"  I have not used cash in the last 3 months for any purchase.  Not even change  

[Anonymous]

@BadKarma, sounds like the envelope method is working well for you!

My parents used the envelope method when I was a kid, and it seemed to work well for them as well. Personally, I use a mix of cash & cards. I'm used to using debit cards, and have now switched to using reward credit cards in the same manner. In other words, I only buy things I have enough money for in my bank account. I like to use cash primarily for fun and entertainment and put most of my regular expenses on cards. And I base my budget on my income and typical spending patterns. I much prefer to budget electronically (i.e. with money that's in my bank account) rather than the envelope system, as that ensures I won't lose the envelopes!

[Anonymous]

I think having a budget and sticking to it is the key. My dh and I are relatively new to using credit cards for the rewards. We have always had excellent credit, but just used our debit cards mostly and reserved our cc for trips or the ocassional 0% offer.  It had never occured to me that we could be making money using them for our everyday spending. We spend the same amount of money as we always did, but now we are earning extra money through the cash back. 

So for us it doesn't seem to matter because we are still living within our budget no matter what the method of payment used. I do think credit cards can be a bad thing for some people especially if they have a hard time living within their means. We use YNAB for budgeting and I can definitely reccomend it.

[Anonymous]

I have done an exercise of this in a different way.  For (2) months I was 100% cash, and I mean that for all purchases that were not paying bills (gas, food, eating out, bars, et all).  I had receipts for everything and totaled those (2) months.  After that I went 100% card only for (2) months and added that up.  I actually spent less with 100% card than 100% cash.  With the cash route once I got down to a certain level I would immediatley hit the ATM to "restock the shelves".

Most of us here are of an age that we are no longer tempted with foolish expenses and can soundly differentiate a "want" from a "need".  As such we can responsibly use credit, stay out of debt, and utilize the advantages in life that comes with paying credit versus cash. 

Oh, in short, F Dave Ramsey.  The man is a hypocrite.  I will admit his methods have helped families become solvent and promotes the premise of a debt free life but the man is a damn hypocrite once away from the media.

[bada_bing]

There are a couple of ways credit cards can have an influence that is detrimental to

a person's finances. The obvious one is facilitating overspending on spur of the moment

items. That obviously happens to some people and can be a serious enough issue to

cause serious debt. 

The influence that is a bit harder to quantify is the idea that credit card limits are a suitable

replacement for an emergency fund. You see that idea floated on the forums in various

ways all the time. To what extent people are changing their longer term financial plans

because they feel comfortable with credit cards as their primary back up for shortfalls is

hard to say, but it seems fairly common. Probably more people end up in credit card debt

due to "emergencies" than from frivolus overspending, so anything that detracts from good

savings habits is definitely an issue.