Cash and carry keeps you out of debt

Here’s an article from Tulsa World.  Many people are moving to use more cash and less credit for purchases during the upcoming holiday season.  That’s a direct outcome from the credit crunch, joblessness and the general economic malaise.  It also reminds me of how depression era folks operate.  My parents grew up during that era and they were extremely frugal as a result.  They were strictly cash and carry on pretty much everything, even houses and cars. They saw debt as slavery.   They weren’t unusual in that respect as many folks who experienced the Great Depression of the 1930’s operate the same way.

The baby boomers and subsequent generations grew up with the illusion of plenty.  It was an illusion as it was fueled by credit and it’s been shattered by the credit crunch and unemployment.   Economic outcomes always influence a broad variety of behaviors and the Great Depression II will be no different.   Actually, debt avoidance and paying down debt  is precisely what folks need to do to rebuild their personal balance sheets which ultimately helps improve the overall economic conditions over time.      So,  if you want to help your country, pay cash, live below your means and avoid debt wherever possible.

Shoppers plan more purchases with cash

by: PHIL MULKINS World Action Line Editor
Friday, November 27, 2009
11/27/2009 4:53:42 AM

Dear Action Line: I don’t know what everyone else is planning, but my friends and I will not be using credit cards this holiday season. Our interest rates and minimum payments were raised, after years of faithful payment, leaving us all upset with the credit card industry. Most of us will express our disdain by paying cash or using checks or debit cards for gift shopping and I hope everyone else does the same. — L.T., Tulsa.

What goes around comes around and holiday spending surveys show consumers plan to cut holiday spending and reduce their usage of credit cards. Card delinquency rates are up again, indicating consumers are still in financial stress, said Bill Hardekopf, CEO of credit card watchdog group “Many cardholders are still reeling from large APR increases this year and can no longer afford to charge through the holidays.”

The National Retail Federation’s 2009 Holiday Consumer Intentions and Actions Survey showed U.S. consumers plan to spend $683 on holiday-related shopping, a 3.2 percent drop from last year’s $705. About 71 percent of consumers plan to use cash, check or debit cards to pay for gifts. Only 28 percent say they will use credit cards, compared with 32 percent last year, a 10 percent decrease.

“Paying with cash is the best safety brake this holiday shopping season,” said Hardekopf. “Studies show consumers typically spend 12 percent to 18 percent less when using cash. Counting and handing cash is a sobering reminder of what products really cost. It makes us pause and consider whether the purchase is worth our labor or not.”

A recent USAA (United Services Automobile Association) survey, at , showed 55 percent of respondents plan to avoid charging holiday purchases and 85 percent plan to use cash. Among card users, 74 percent plan to pay off balances immediately to avoid the 20 percent interest their issuers are now charging. Only 7 percent say they will pay just their minimum payments.

Many consumers have no plan for holiday spending and 19 percent are not sure how they will pay for holiday purchases. Another 22 percent who plan to use cash haven’t saved any money in advance, said the USAA survey.

“Now is the time to budget and plan for holiday shopping so you don’t get caught up in the moment and spend more than you can afford,” said Hardekopf. “Credit card rates are now too high to just charge something and assume you’ll be able to pay it.

“If you charge $1,000 on a credit card with a 15-percent interest rate and just pay $25 each month, it will take you until May of 2014 to pay off. You will pay $370 extra in interest. If your APR was recently increased and you carry a balance, leave that card at home so you won’t charge anything more on it,” he urged.

Millions of Americans are still paying off the holiday purchases they made last year and 6 percent of adults (13.5 million Americans) were still carrying debt from last year’s holiday season. In households with children under 12 years of age, 10 percent were still carrying debt, according to the Consumer Reports Holiday Shopping Poll from October.

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