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New blog article: Why Using a Credit Card Makes It Easier to Overspend

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Elizabeth_FICO
myFICO Employee

New blog article: Why Using a Credit Card Makes It Easier to Overspend

Hello everyone! If there's a new blog article that I think you guys might like I plan on posting it in the Forums.

 

This week's article is: Why Using a Credit Card Makes It Easier to Overspend

 

Let me know what you think about the article.

 

For more content don't forget to check out our blog.

Message 1 of 6
5 REPLIES 5
ptatohed
Valued Contributor

Re: New blog article: Why Using a Credit Card Makes It Easier to Overspend

I think an important one that this article didn't even touch on is rewards.  As in credit cards rewards, not the rewards/gratification this article talks about.  When a card offers certain rewards (cash back, points, miles, special spending offers, etc.), one might be tempted or inclined to make a purchase they may otherwise not have made because of the reward draw.  While I try my best to be conscious of this and only buy things with credit cards that I would have otherwise, even I have been guilty of this.      

5% CB rotating: ;
Everyday 3% CB: ;
Everyday 5%: ;
Companion Card: ;
Everyday 2.2% CB: ;
Retired to sock drawer after AOD (kept alive w/ 1 purchase every 6 mo): ;
On my radar: ;
Still Waiting for an Invite: ;
No hope:
Message 2 of 6
Horseshoez
Valued Contributor

Re: New blog article: Why Using a Credit Card Makes It Easier to Overspend


@ptatohed wrote:

I think an important one that this article didn't even touch on is rewards.  As in credit cards rewards, not the rewards/gratification this article talks about.  When a card offers certain rewards (cash back, points, miles, special spending offers, etc.), one might be tempted or inclined to make a purchase they may otherwise not have made because of the reward draw.  While I try my best to be conscious of this and only buy things with credit cards that I would have otherwise, even I have been guilty of this.      


I guess it is all in one's mind set; between 2013 and 2020 I went with no credit cards at all and lived exclusively off my debit card; it pretty much sucked, especially when trying to get a nicer hotel room or when renting a car at an airport.  Since getting back into the credit game I have never once been tempted to overspend; I just use my credit cards like I used my debit card.  Of course there is a difference, the rewards; I keep a running spreadsheet on monthly charges by card as well as the rewards, and since July of 2020 I've earned $2,393.52 on charges totalling $166,880.06, which is exactly $2,393.52 more than I would have gotten if I'd continued using my debit card.

I categorically refuse to do AZEO!
Message 3 of 6
longtimelurker
Epic Contributor

Re: New blog article: Why Using a Credit Card Makes It Easier to Overspend


@Horseshoez wrote:

@ptatohed wrote:

I think an important one that this article didn't even touch on is rewards.  As in credit cards rewards, not the rewards/gratification this article talks about.  When a card offers certain rewards (cash back, points, miles, special spending offers, etc.), one might be tempted or inclined to make a purchase they may otherwise not have made because of the reward draw.  While I try my best to be conscious of this and only buy things with credit cards that I would have otherwise, even I have been guilty of this.      


I guess it is all in one's mind set; between 2013 and 2020 I went with no credit cards at all and lived exclusively off my debit card; it pretty much sucked, especially when trying to get a nicer hotel room or when renting a car at an airport.  Since getting back into the credit game I have never once been tempted to overspend; I just use my credit cards like I used my debit card.  Of course there is a difference, the rewards; I keep a running spreadsheet on monthly charges by card as well as the rewards, and since July of 2020 I've earned $2,393.52 on charges totalling $166,880.06, which is exactly $2,393.52 more than I would have gotten if I'd continued using my debit card.


My guess is that if you have already got into trouble with credit, you are likely to be much less likely to overspend once you have rebuilt (at least for those who come to forums like this and stay!)   

 

The level of rewards may also be a factor, when I was the proud owner of an almost ground-breaking 1% back card (around 1987) I was aware that clever me wasn't really going to pay $10 for that thing, it was only going to be $9.90   But that probably wouldn't influence me enough to buy 20 of them  (OK,  yes it did)

On the other hand, if I am say 20K miles from my dream travel award (20 night stay in Motel 6 in Elizabeth NJ), I might well be tempted to spend, because it gets me to my goal  and the "savings" from my travel award make the purchases almost free.

Message 4 of 6
Horseshoez
Valued Contributor

Re: New blog article: Why Using a Credit Card Makes It Easier to Overspend




@longtimelurker wrote:

@Horseshoez wrote:

@ptatohed wrote:

I think an important one that this article didn't even touch on is rewards.  As in credit cards rewards, not the rewards/gratification this article talks about.  When a card offers certain rewards (cash back, points, miles, special spending offers, etc.), one might be tempted or inclined to make a purchase they may otherwise not have made because of the reward draw.  While I try my best to be conscious of this and only buy things with credit cards that I would have otherwise, even I have been guilty of this.      


I guess it is all in one's mind set; between 2013 and 2020 I went with no credit cards at all and lived exclusively off my debit card; it pretty much sucked, especially when trying to get a nicer hotel room or when renting a car at an airport.  Since getting back into the credit game I have never once been tempted to overspend; I just use my credit cards like I used my debit card.  Of course there is a difference, the rewards; I keep a running spreadsheet on monthly charges by card as well as the rewards, and since July of 2020 I've earned $2,393.52 on charges totalling $166,880.06, which is exactly $2,393.52 more than I would have gotten if I'd continued using my debit card.


My guess is that if you have already got into trouble with credit, you are likely to be much less likely to overspend once you have rebuilt (at least for those who come to forums like this and stay!)   

 

The level of rewards may also be a factor, when I was the proud owner of an almost ground-breaking 1% back card (around 1987) I was aware that clever me wasn't really going to pay $10 for that thing, it was only going to be $9.90   But that probably wouldn't influence me enough to buy 20 of them  (OK,  yes it did)

On the other hand, if I am say 20K miles from my dream travel award (20 night stay in Motel 6 in Elizabeth NJ), I might well be tempted to spend, because it gets me to my goal  and the "savings" from my travel award make the purchases almost free.


Such considerations were never part of my mindset; I got in trouble with credit not because of my own spending, but because of my (now former) business partner's spending in my name.  We'd been in business for over 30 years and I trusted him implicitly and then, yikes, I suddenly had collections firms contacting me about not one, not two..., but five lines of credit in my name (three credit cards and two loans) amounting to over a quarter of a million dollars of debt.  Yes, my wife and I had run up some credit card debt at the time, but it was nothing we couldn't have recovered from, but with that debt on top of ours, it was unrecoverable.

I categorically refuse to do AZEO!
Message 5 of 6
CorpCrMgr1
Frequent Contributor

Re: New blog article: Why Using a Credit Card Makes It Easier to Overspend

Few use cash to pay for items. I never see anyone pay by check anymore at a retail store. Except for my water bill and my taxes, which would charge me if I paid with a CC, I pay everything online. I carry little cash though in Mom and Pop stores I often pay by cash. Since some establishments now hold back tips paid via CC until the middle of the next month I sometimes leave cash tips.

Yes, I want my rewards from my CC. There are establishments that won't take cash i.e. sport stadiums that have free debit card conversion from cash. Must admit I know of a couple of restaurants that won't take CC.

I admit to buying more with a CC. I'm not going to carry a couple hundred dollars in cash.

 

Message 6 of 6
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