Will That Be Cash, Check or Charge?

The dictionary defines a curmudgeon as a crusty, cantankerous, old person full of stubborn ideas. For the most part, my friends tell me that I’m a fairly likeable fellow and even tempered.  But at times certain things just bother me and I may just seem more like one of those curmudgeon characters. Currently, I am annoyed with the advertising campaigns of credit card companies.  Have you ever noticed how the main focus in their commercials is the reward programs?  By charging purchases that we often can’t afford in the first place, we can earn a reward.  Cardholders can get a new mountain bike, an Ipod, or free air miles just for charging things on that piece of plastic.  Then we earn another reward. We get to pay 15% interest on our outstanding balance. They never mention interest rates in the commercials, which explains why we get so many credit card offers in the mail. Doesn’t everyone wish they could get a 15% return on their investments?  Here’s an idea from the past.  When we want something that isn’t absolutely necessary and don’t have the money to buy it, save up for it. Then we can buy it and pay cash, or charge it and pay off the balance on the next statement. We might appreciate our new acquisition more and it would save us a big chunk of interest expense thus creating our own reward program. The advertising of the credit card companies would have us believe that we deserve instant gratification. The “you deserve it now” theme runs through much of the advertising on both TV and in print. I’m sure that some who are reading this can remember when there were few credit cards available. Consumers reached in their wallets and paid cash and if their wallet was empty, they didn’t buy it.  Today the median amount of credit card debt carried by the average American household is $9600 and climbing. It is estimated that this revolving debt costs families approximately $1500 per year in interest payments. Over a 30-year period this adds up to $45,000 in additional expense. Instead, if this money were invested monthly over the same 30-year period in a conservative investment yielding just 5%, it would grow into a nest egg in excess of $100,000. That would be a great way to save for the retirement years. Consumers are spending money that they don’t have and the tab is growing. Americans currently owe $2.5 trillion in consumer debt and spend over $50 billion a year in interest payments.  Some of the latest commercials come right out and discourage the use of cash, claiming that it is old fashioned and slows up the checkout line. Don’t get me wrong, credit cards are handy and sometimes a necessary tool, like a hammer. The problem is that if we don’t use that tool carefully, we could hit our thumb (and THAT hurts). I’d like to think that I am not really a curmudgeon but just a guy who still holds on to old-fashioned values and ways of thinking.  Although it may not always seem possible, we would all benefit by working toward the goal of freedom from credit card debt.

 

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