Plastectomy... (plagerism?)

I think Dave Ramsey invented the term... He uses it as a one-word description of cutting up one's credit cards forever. Dave uses scissors. His audiences get a little more creative... ...chainsaws, guns, shredders... ...you get the idea that people are a little fed up with the little plastic cards that we have been indoctrinated into believing are a way of life in our culture. It is a passionate, emotional, even merciless occasion.

So, why the extreme behavior? In short, many thousands of people have had an eye opening experience by going through Dave's classes or listening to his show. They have begun to understand that the bank (creditor) is selling a product, and are making a profit on the customer (the lender).

We watched as Dave on stage animated the average customer walking into the bank on his knees begging, "Please, please, please, Mr. banker let me have some...." (If only we had a product like that, huh?)

And all that time we thought we were being smart. We thought that it was intelligent to use "Other Peoples' Money (OPM)" but later we find that we had become addicted and enslaved to it. What we once thought was OK had become the the Master of our money, instead of us mastering our own money.

Proverbs 22:7 (New International Version)

7 The rich rule over the poor,
and the borrower is servant to the lender.

I hear all the time, "I use a card, but I pay it off every month." I can't help but remember that I talked myself into the credit cards with that phrase in mind.

And I had good reason. In fact, Larry Burkett said that if you had or used a credit card, fine, but the first month that you fail to pay it in full, then you should cut it up. Given that somewhere between %80 and %90 of us who use a credit card do not actually pay it in full, I have changed my mind.

The banks know that most of us will not do it - and they make a LOT of money on credit. I am told that Sears, Penny's, GM, Ford and Chrysler have all become creditors more than retailers - they make more oney on credit than in sales of all of their other products.

It doesn't matter to me any more that you can pay it off every month. There are two reasons. The first is that the Bible says that debt is a bad idea - even for a day.

Proverbs 6:4-5 (New International Version)

4 Allow no sleep to your eyes,
no slumber to your eyelids.

5 Free yourself, like a gazelle from the hand of the hunter,
like a bird from the snare of the fowler.

The second reason is that there is a risk that you take when you use the credit card. The biggest part of that risk is that you are gambling that your next paycheck will be full and on time. The rest is that you are dealing with a company that employs a lot of lawyers to write a lot of fine print that I doubt you or anybody else can readily explain.

They can and do "lose" payments in the system, which means that it arrives late and then they proceed to raise your rates to %24 or more and dock you for a $29 late fee! They guess rightly that most people won't go to the mat over a $29 fee.

(Guess who's had this happen to him before - I was mad. It was the first time that lost my temper with a stranger on the phone. I did get the charge removed and got the interest down again after I threatened to "surf" the balance to another card... This was before I knew anything about Dave Ramsey, though and I didn't learn my lesson then.)

There is congressional testimony regarding this fraud, yet we hear little about it, and we continue to "do business" with companies that are dishonest. This is not intelligent. It is not even convenient when you consider the possible problems. Fire them. Cut the cards. End the risk and be a steward of your money.

Debit cards are somewhat different. They draw directly from your checking account, but that brings risks of its own. At least you aren't in debt to anyone though.

We take the additional precaution of keeping seperate checking accounts. We only use the debit card for one of the accounts, so that in the event of a problem (in which the bank will often "freeze" the money) we still have money to draw for gas and groceries. We also use it for Internet purchases, transferring the budgeted money for such transactions.

Many debit cards (such as those that have the little "Visa" symbol in the corner) have the same protection as credit cards and they are useful for car and room reservations too.

BUT, whatever the version of plastic you take to the register, there are recognized studies showing that we spend %12-%18 more with plastic than with cash. That means that when we go to Home Cheapo for a $50 widget, we also add a $6.00-$9.00 widget accessory.

On the other hand, if you walk in to the appliance store with $450.00 cash, you have a tool with which to get a bargain! You might get a $500.00 Wash-O-Matic for the cash you have to wave at the sales person and get a deal. This is the complete opposite of what you get when you have a plastic budget. GO GREEN!

(Be willing to walk away - you might have to go to 3 different appliance stores or get to a manager to get a deal, but then isn't that worth $50?!!)

I will start working on describing the cash envelope system that Dave Ramsey, Larry Burkett and Larry's grandmother recommend on the next post or two. I hope that you are starting to see the "personal" part of personal finance in the meantime. It is emmotional, spritual and even physical. It is important.

God Bless!