By BRETT ARENDS
The dollar bill needs you.
A growing number of merchants won't accept cash anymore. That includes a lot of airlines, which insist you pay by credit card if you want to buy a drink or a sandwich on board. And now comes news that the U.S. Treasury is printing fewer dollars, as we move towards an all-plastic economy.
Great news for the banks. Great news for the card companies. Great news for the marketing establishment, which can now pore through our transactions and our personal lives in greater and greater detail.
Me? Call me a contrarian, or just call me ornery, but I view this with gloom. This not a step forward. It's a step backwards. Personally, I've been moving the other way. I've cut down on my use of credit cards and debit cards. The latest news is the final push I needed to get them out of my life completely. I'm going all cash.
Here are ten reasons why.
1. I'll spend less. A variety of scientific studies, such as this one at the Massachusetts Institute of Technology, have found that people are simply willing to spend more when they use credit cards than they do when they use cash. It's common sense. No wonder our national obsession with shopping really took off when credit cards came on the scene. And I've found it personally. Last fall and winter, when I went for an extended period without carrying any plastic at all, my day-to-day spending rate absolutely collapsed.
2. The card bonuses aren't worth it. A lot of people use their credit cards for the frequent flyer miles or other bonuses. But many of these deals are getting less valuable. Airlines are cutting back on flyer programs. And how good were these programs anyway? Schwark Satyavolu, co-founder of BillShrink, says that if you are really smart, dedicated and targeted about getting and using your bonuses, you can sometimes get very good deals. But overall, he says, deals are getting less valuable, and are increasingly focused on cards with annual fees. Most of us are doing very well if we manage to get back 2% on our cards. Compared to the extra amount you spend, that's chicken feed.
3. Cash makes budgeting easy. Personal financial planners encourage clients to draw up budgets. It's great advice, in theory anyway. But I have a confession: I'm just not that organized. Nor, I suspect, are lots of people. But if I go to the bank once a week and draw out a certain amount of cash, it makes the budgeting automatic. Easy.
4. Less worry about identity theft. Do you worry about handing out your card or details every time you make a purchase? I do. The banks and online merchants work hard to maintain security, but the crooks are just as inventive. And there are plenty of them. People suffer identity theft all the time. Using cash cuts down on the risk.
5. Fewer impulse purchases. One way credit cards let us spend more is that they make it easier to buy things that we don't need, and may not even want, on the spur of the moment. And the stores are set up to encourage it they rely on sophisticated marketing science to manipulate you into reaching into your wallet. If you don't have the money on you, you can't splurge. If you really want the item in question, you can come back and buy it tomorrow. Chances are you won't.
6. I can still shop online. Just because I'm using cash doesn't bar me completely from getting online deals. Yes, I'll have to bend a principle, but I won't have to break it: I can buy a prepaid card in a store and charge it up with cash. Okay, so it's plastic, but I have to pay for it in advance, with cash, and it will have a limit. (On the same principle, I can also use a prepaid card as an emergency backup if I travel).
7. Say goodbye to debt. I pay my cards off in full every month, but a lot of people don't. They use their cards to borrow, and it's a financial disaster. We've seen what the overuse of debt has done to our economy. According to Bankrate.com, the average card charges you 14% interest. Many charge a lot more. And you're paying with after-tax dollars. As an illustration, you'd have to earn at least 16.5% on the stock market (before long-term capital gains tax of 15%) just to keep up. Good luck with that. Says New York University's Stern School of Business, since 1928, U.S. stocks have produced an average compound return of just 9.7%. And Bankrate calculates that someone who buys a $1,000 item on a credit card charging 14% interest, and merely pays 2% of the balance each month, will end up paying $1,750 for that item. It will take 110 months to pay off the bill.
8. Privacy. Credit cards are great for tracking people. They tell you exactly what you bought, where and when. (Throw in all the data tracked by your smartphone, your iPad and so on, and we're basically rats scurrying around in a Perspex cage while marketing strategists study our every move). I have to confess I hate it. And I love the privacy and anonymity of cash. Last week I meet my wife for lunch. But I stopped by my bank first to take out cash. It's none of American Express' business.
9. Cash rebuilds the link between what I earn and what I spend. I remember back when I got my first job: I started calculating how much everything I spent cost in terms of hours worked. That new CD cost two hours of my time, and so on. It was a good discipline. Credit cards weaken the link. It's no wonder that the rise in plastic has resulted in an explosion in the numbers living beyond their means. (Is it also a coincidence that the rise of the credit card has also coincided with the collapse in unions? Before VISA, if you wanted a fancier car or vacation next year, you needed a pay raise).
10. Cash helps people I want to help. The money goes to the merchant and his suppliers. When I go into my local credit union to cash a check, I'm keeping a couple of local tellers in work. Credit cards? I'm helping finance bank executives, marketing teams and call centers in India. I am sure they are all fine people, and I wish them well. But if I had to choose, and I do, I would rather help my local merchants and credit union staff.