Online Calculator | Consumers Tired of Credit Return to Using Cash

Consumers Tired of Credit Return to Using Cash

Cash only money management

A recent CNN Money article highlighted people from all over the USA who have switched to cash only transactions to better manage finances. William Hazelgrove, from St. Charles, IL., tired of mortgage loan, auto loan and unsecured loan debt. He isn’t alone in his sentiment – but unlike a lot of people, he’s doing something about it. In the past Hazelgrove and his family dealt with credit much like most people did. When he received bills, he’d pay them with his credit card. It wasn’t until the credit card company egregiously raised the interest rates due to the recession when he realized the problem. “I realized if I ever wanted to live within my means, I would have to switch to using cash only.”
Hazelgrove took stock of his finances, and slowly but surely, began paying down debt and increasing savings. He got a second job, and put the funds right into both. His complete solution included:

  • Keeping a debit card balance above $100
  • Liquid savings of $5,000 for emergencies
  • Using Quicken to keep track of every expense

One of the main commitments he had to subscribe to was not spending when cash was low. He said, “It was hard, especially towards the end of the month, but I had to forego credit card spending. If I couldn’t afford it, then it had to wait.” He admitted it was hard, but he was able to pursue and achieve his goals. His commitment to living credit-free is not a bad idea.

Statistics on credit

When it comes to credit, almost everyone has it. A recent study by Hoffman & Brinker revealed that Americans totaled up to $ 917 billion in credit debt by September 2009. Almost 70 percent of that credit debt is past due.

It’s no secret that consumers over-used their credit, and the harsh reality is that lenders have changed their rules in terms of lending and limits. Lacking a plan, a lot of people find themselves in dire straits with their finances. Now they don’t lend mortgage loans, car loans, or unsecured loans to just anybody who applies anymore. Before the recession, laws were a bit more lax. Funding was easy to get, and if you had a credit score of any kind, you could find a lender to loan you money. Granted, the money most likely would come with a hefty interest rate, but for most consumers that was a price they were willing to pay.

Today’s world of cash management

The lending crash had the biggest effect on people going cash-only. Due to the number of defaulting borrowers, credit card companies had to take drastic action to mitigate their losses. They raised their interest rates to where they were unmanageable, and then cut limits. One consumer, Daphne Harringe of Cincinnati, Ohio, said, “We always used credit to manage our monthly bills. Always. Then suddenly our interest rate shot up to 27 percent after one delinquency. It was difficult to manage, but we realized that we had to switch to cash if we were going to save our future.”

More and more consumers are heading towards a cash-based money management system. Particularly because of the way credit lenders took the recession, borrowers saw how unreliable credit can be at times. More consumers are now moving away from traditional funding methods like unsecured loans, mortgage loans and credit cards. They are opting to use cash instead of credit, and take their future in their own hands.

Filed Under Online Calculator | Leave a Comment

Tagged With , , , , ,

Comments

Leave a Reply