Debit Cards, Rewards, and Security

No Credit Needed pointed me towards visaextras.com, a free points/rewards system for users of debit cards. There are a lot of people who are so blinded by the prospect of rebates and rewards that they wouldn’t dream of using anything but plastic. While I would disagree with them, at least using a debit card links your spending to your income in a very direct way.

MSN Money has a related article on rewards and security for debit cards. The most important thing to understand here is that DEBIT CARDS HAVE THE EXACT SAME FRAUD AND LOSS PROTECTION AS CREDIT CARDS. Check

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MasterCard Makes Identity Theft Easier!

I just saw a commercial that really struck a nerve. It is from MasterCard (I believe) and is touting the new proximity cards that don’t require a signature.

The ad is a story about a sick zookeeper who has his animals steal his card, then go to the store and get him chicken soup, a blanket, and other soothing things. Then the animals swipe the card and are able to buy the items without a signature or a second look from the merchant.

I thought this was an excellent commercial, at least from my point of view, as it showed how insecure these tools really are. It tells the world, any mammal can steal your identity!

Finding Inspiration

You can’t wait for inspiration. You have to go after it with a club.

— Jack London

Why I Don’t Use Credit Cards

The issue of credit cards comes up a lot when I teach FPU, and there is always someone who doesn’t see the problem with using them. Personally, I think credit cards are at best dangerous and at worst usurious. There is absolutely no upside to credit card debt, whatsoever.

Here are several reasons why I don’t use credit cards for my finances:

  • On average, people spend 12-18% more when they use credit cards vs cash.
  • Credit card companies don’t have any loyalty.
  • Perks and rewards come at a very high cost.
  • Credit Cards make it difficult to track your purchases day-to-day and easy to buy things you can’t afford. I don’t want to use any tool or service that has a vested interest in damaging my long-term future.

Here are some reasons why I don’t do business with these companies:

Dabbling with credit cards is like playing with snakes. Don’t be surprised if you get bit!

Buying Used

I was browsing through MSN Money and found a great article titled “10 Things You Should Never Buy New“. There is some great practical advice here, definitely worth a read. Our culture is so focused on consumption and the marketing messages are so strong that it seems positively radical to settle for something other than the latest and greatest new thing. Buying used can be a fantastic way to stretch your resources and truly have your cake and eat it too.

An example … this weekend I took my 3 and 6 year olds shopping and we got bought a soccer ball, a toy helicopter, a model, a board game, and some action figures. Plus, we stopped at the restaurant of their choice and got lunch. Sound expensive? It certainly could have been! However, on Saturday our church had a very large garage sale, and everything they bought was used. The grand total of their purchases was $5, and the soccer ball only cost a nickel. Lunch consisted of a hot dog, chips, and a soda from the card table out front, which cost $2 each, for a total of $9. Now, this was money that they earned (through commissions, not allowance) and they were thrilled with their purchases. Doing this at a toy store and a chain restaurant could have easily cost us a hundred dollars or more.

At the same time, this week the entire family is going to go to see The Lion King on the stage, a big deal for us. The tickets are very expensive, several hundred dollars for all of us. Normally we could not have afforded both a shopping spree and a night on the town. However, we were able to do both by buying used.

Give it a try!

Luxury or Necessity?

Pew Research has published some survey results on attitudes around what the average American considers a luxury and what is a neccesity. The list of things that the average person “can’t live without” has multiplied in the last decade, incorporating items that are new (such as technology and computer-related items) and previously available (microwave ovens, air conditioning, clothes dryers) alike.

While this isn’t particularly surprising, the survey tells a lot about American life in 2007. The thing that grabbed me was this statement:

… one pattern was consistent: wherever there has been a significant change in the past decade in the public’s judgment about these items, it’s always been in the direction of necessity. And on those items for which there are longer term survey trends dating back to 1973, this march toward necessity has tended to accelerate in the past ten years.

I think this tells us a lot about the American mindset and the power of marketing in our culture. We don’t just want it, we want it now, regardless of the consequences. It doesn’t really matter if we need it, or if we can afford it, only if we can get it really quickly.

Week 2 Homework

This lesson is titled ‘Cash Flow Planning’. This is critical, the only way to get your financial house in order is to understand where your money is coming from and going to.

The homework for Week 2 is:

  1. Read chapters 19 and 21 in Financial Peace Revisited.
  2. Complete your zero-based budget and be ready to show it next week.

Lastly, we have some additional reading on this subject, if you are interested.