No. of Recommendations: 10
>> I for example always use my credit card, gas, groceries, lunches, dinners out, afternoon diet coke for MD, utility payments, etc. But I fail to see how I am spending more as everything I buy is according to a budget, groceries, utility payments, gas, etc. I would have spent the same amount had I used cash or a debit card. BUT AGAIN I WONDER WOULD I (OR OTHERS YOU DO AS I DO) HAVE BUDGETED THE SAME HAD I KNOWN THAT I WOULD BE USING CASH. I think so but I really would like to see what, if anything, the scientific literature says. Unfortunately, I have seen very very few studies of behavior regarding spending habits with a credit card, and as far as I can tell none of these looked at any other factors that might explain the behavior. <<

See, here's the thing about the "15% more spending" that Dave Ramsey always harps on. First of all, I have no trouble believing this, given what I know about human nature. However, Ramsey tends to preach to the "lowest common denominator" in terms of budget and money management skills; I suspect that's why he pretty much ALWAYS argues against using debt and why he argues for snowballing based on account balance rather than highest to lowest interest rate. He has to assume -- reasonably in most cases, IMO -- that people are prone to repeat the same mistakes they've made in the past and are going to step in it if they don't follow the steps.

Going back to the study in question, for example, that 15% increase in spending is an average. Not an across the board number. So if 3/4 of the people spend 20% more but 1/4 of the people do not spend one cent more, then we get an average of 15%. Clearly that looks like an argument for putting the plastic away even if you pay in full, but that also means that 1/4 of the people are leaving points, miles and cash back on the table unnecessarily if they follow his advice as inviolable gospel.

I suspect the problem Ramsey has with people proposing to deviate from his "teachings" is that a lot of people really do *think* "they're different" when they really aren't. These are people who "think" they can avoid running up a credit card again after consolidating them into a HELOC. These are people who "think" they can stay with a snowball by going after the highest rate first instead of the smallest balance. These are people who "think" they can use plastic for everyday purchases without spending more. But more often than not, they can't.

But for those who have demonstrated that they *can*, some of it can be taken with a grain of salt. Avoiding plastic for everyday purchases because you might "spend more" is one of them.

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