No Credit Cards:
However, it serves a vital purpose -- especially if folks find that they have become what we call "credit card dependent."
What is the vital purpose behind this challenge?
We hope to help credit users:
According to one source, many professional truck drivers live a hand-to-mouth existence.* So it can become really easy to just put expenses "on the card" instead of paying for them outright.
Of course, using no credit cards means that you have to have money on hand to pay for your expenses. If you want an extra special challenge, not only will you not use credit cards, but neither will you use a debit card -- even though it draws money directly out of an account -- for a month. Just cash. Only cash.
We Don't Need No Stinking Challenge!
We can well imagine the arguments against this no credit cards cash-only challenge:
As we say on our cash advances page:
You may have seen articles online answering the question as to whether or not people spend more money when using credit cards than when using cash. One article said the study doesn't exist, the author of another article put the theory to test himself, and a third provided this quote:
"Credit cards effectively anesthetize the pain of paying," said George Loewenstein, Carnegie Mellon professor of social and decision sciences (SDS) and co-author of the paper. "You swipe the card and it doesn't feel like you're giving anything up to make the purchase, unlike paying cash where you have to hand over bills."
If you know what your credit card expenses are and you're not extravagant beyond what you can pay off each month, good for you! Maybe you're the type who doesn't need a no credit cards challenge.
Who Does This Challenge Hit Hardest?
This challenge of using no credit cards for a month can be especially painful for professional truck drivers who travel all over the country or even internationally.
Add to that the extra cost of a foreign ATM fee (for withdrawing money from an ATM outside the network of your home bank) and the cash-only challenge becomes even more expensive.
In those cases, we would encourage drivers to plan undergoing the challenge in advance.
Yep, challenge yourself to use no credit cards for a month. Set the wheels in motions, so to speak, so that you can succeed.
If necessary, set some goals.
Prove to yourself that you can do it. If you need our help, here we are.
Easy Credit: A Dangerous Position To Be In?
Our site is for truckers worldwide, but many of our readers are in the USA.
Some may disagree, but we think that these days it can be a little too easy for Americans to obtain revolving lines of credit. In fact, accepting a "no credit cards" challenge may seem downright ridiculous because of the availability of easy credit.
This raises the question: Why are people getting and using credit?
Although some folks use credit for different reasons, one reason concerns us deeply.
According to a July 2011 article:
"More and more consumers use their credit cards to buy necessities like gas and food, according to a recent report. Americans are using plastic to make up the difference between stagnant wages and rising prices, which could soon put them deeper in the hole." (emphasis added)
Bloomberg put it more concisely:
Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices.
Obviously, credit card companies issue credit cards in order to make money from the interest. The rates can be pretty high. Some folks allow themselves to get "sucked in" when using them. If you're one of them, we urge you to use no credit cards for a month.
How Are Truckers Affected?
According to an April 2012 article in Journal of Commerce, entitled "Truckers' Lagging Earning Power", author William B. Cassidy (Senior Editor) wrote:
... The average annual pay for the nation's 1.51 million tractor-trailer drivers increased 1 percent last year to $39,830, the BLS data show. That's right, $39,830.
While driver wages increased 1 percent, the inflation rate in 2011 was 2.9 percent, according to the U.S. government, thanks largely to higher energy and food costs. The average overall U.S. wage increased 1.9 percent in the same period.
Here's the kicker. That average trucker pay is lower than the overall average U.S. wage, and the gap between them is getting wider. Since 2001, average driver pay has increased 18.2 percent, but the overall average wage is up 33 percent.
Trucking wages are not only not keeping up with inflation, they're not keeping up with the prevailing wage in the job market.
Now do you see why we're especially concerned for truckers?
Sometimes folks who use credit cards tend to think of it as an extension of a checking account. Oh, they know they'll pay off the bill sometime. But that's later. Later!
One trucker was overheard saying:
By way of reminder, Mike had his own credit card statement shock some years back. He learned his lesson. He now knows when to say, "No credit cards!"
It may be virtually impossible to completely switch over to paying cash for everything you buy -- especially if you're an owner-operator.
You may have to pay for your truck's fuel with a credit card, or you may have your business credit card linked to your financial software package so that you can track expenses.
As in the case of paying for fuel, it could be downright dangerous to carry that much cash with you in your truck. You risk getting robbed or becoming a target.
In cases where you have a bill with a fixed amount every month, you know how much your bill is going to be. Hopefully, you've got that part of your budget under control.
We understand all these things. And it's not like we're asking you to take the "no credit cards" challenge to please us anyway. This challenge is for you.
If you have become just a little too dependent on credit -- and only you and your family members know for sure -- using no credit cards for a month may be a goal worth pursuing. Talk with your home support team members to get their support before taking the challenge.
An Entry Point on Using No Credit Cards
If going "cold turkey" isn't for you, how about just saying "no credit cards" to discretionary spending as a start?
As depicted on the right, if you feel that you can't "dive in" full blast, how about "wading" in a little at a time?
How well do you think you can do on not buying anything that you could theoretically do without -- like "want-to-have" (not "need-to-have") restaurant meals all month?
Or instead of using no credit cards for a month, how about going without credit for a week or two?
Part of the challenge is to make you think twice about your purchases.
Mary Hunt of DebtProofLiving.com recommended going cash only. By the way, did you catch the name of her website? She recommends becoming debt-proof. One way to do that is to use cash only. That is, never spend more money than you currently have and never use credit to spend more than you have.
Have you ever thought about credit as debt? It is debt.
If you find you're tempted to add to your debt by taking your credit cards with you, then perhaps you can leave them at home or in your truck before you go into the truck stop travel store. If you can, see if you can limit yourself to cash-only purchases. If you must, you can extend your purchasing power only to using your debit card, which of course limits you to what you have in your checking account.
Just don't do what one trucker did...
Getting in Trouble With a Debit Card
We know of a trucker who decided to do two things:
Both of these are admirable goals. Except he went about the latter in a way that got him into trouble.
He and his family had agreed that they were not going to put any more charges on their credit cards. In fact, he dumped all of the credit cards out of his wallet.
Besides the small amount of cash in his wallet, the only money at his disposal was through his bank debit card. Using the debit card worked out well for paying for gas for his car when he was home. In fact, some gas stations near his home have a lower "cash price" than a "credit price."
He was putting as much money as possible from his paychecks toward paying off the credit card debt, leaving very little in the checking account.
All was going along pretty well until he forgot to write down one debit in his checkbook. When he went to get more gas, he debited more than was available in the checking account! Ouch!
How was this possible when a debit card draws out of a bank account? Well, sometimes it takes a couple of days for debits to actually "hit" an account.
When an account is overdrawn, all sorts of nasty things can happen like "NSF" charges for "Non Sufficient Funds" getting tacked onto already stretched funds. It's like digging yourself deeper in a hole.
Don't do this. Repeat: Don't do this!
If you're going to undergo the no credit cards challenge, make sure that you have sufficient cash to do so.
Is Using Credit Wrong?
Someone reading this page may jump to the conclusion that we think using credit is wrong or evil. We don't. In fact, if you search our site, you will come across quite a number of times when we have touted our use of a credit card with a rewards program. We have earned a significant amount of rewards over the years as a result of using this card.
However, money is a tool. Just like a hammer, it can be used in good ways and bad ways. We have illustrated at right the point at which being "debt free" and being "in debt" meet as a level of water. Which are you?
We wrote on another page of our site:
As one astute speaker said, "Some people pay interest, others earn interest. Which are you?" Personally, we'd rather be earning interest than paying it.
Consider what happens if you start saving money and let that money earn interest for you.
How much money are you bringing in ("net" after taxes) each week?
How much do you think you will need weekly to retire?
We encourage you to start using a Compound Interest Calculator to put before you a financial goal of your choosing. Start saving and letting interest work for you. Compound it over and over again.
A quote attributed to Albert Einstein goes like this: "The most powerful force in the universe is compound interest."
It's hard to be compounding interest on one hand and paying off credit card debt with the other. That's why we have issued our "No Credit Cards, Cash Only One-Month Challenge."
Money saving tip: Recognize the fact that credit card balances must be paid off in full to eliminate debt and to eliminate being charged credit card interest.
Do not get caught up in the trap of thinking that credit is an extension of your purchasing power or your checking account. It's not.
Using credit without having a sure means of paying it off -- cash on hand -- can be considered "presuming on the future." What happens if you figure you'll pay off today's purchase with next weeks' paycheck and you're involved in an accident and you can't work for a while? Your "sure" means of repaying your debt might go swirling down the drain!
Seek to be debt-free in all respects. Once you've proven to yourself that you are in control of your credit card usage, only then should you seek to earn cash back bonuses from their usage.
Until then, try to use no credit cards for a month. Use cash only for at least discretionary items. If a month is too long, try a week or two. The self-discipline challenge may seem stiff, but if you rise to the challenge and succeed, you know you can do it for longer periods of time.
* Reference: http://www.legalexaminer.com/tractor-trailer-accidents/heres-why-we-dont-have-more-whistleblowers-in-trucking.aspx
Vicki Simons is pleased to
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