Personal Finance News Wednesday 6/12

Phil's Personal Finance Tip of the Day:
Could You Live Without a Credit Card?

By Daniel Bortz | U.S.News & World Report LP 

Giulia Rozzi's unhealthy relationship with credit cards started in college. Surrounded by friends with frivolous spending habits, Rozzi says she adopted the mindset of "spend now and deal with the consequences later." That approach continued after graduation, when she moved to Los Angeles to pursue comedy and acting. Her cash flow was unsteady, but that didn't stop her from using a credit card to bankroll a wealth of discretionary expenditures. A well-deserved pedicure? A fancy dress? A last-minute trip to Las Vegas with friends? All it took was one swipe of the credit card.

She hit a low point in 2004, having racked up $5,000 in credit card debt. Her parents agreed to pay it off - on the condition it wouldn't happen again. "The agreement with them was I would never get another credit card, and of course, I did," Rozzi says. Years later, when she found herself drowning in $20,000 in credit card debt, she decided it was time to give up plastic for good.

Rozzi is among a number of consumers who choose to live without credit cards. Some 29 percent of 1,004 respondents ages 18 years old or older to a 2010 poll by CreditCards.com said they did not own a credit card - around a 10 percent jump from the number of respondents who reported having no credit cards in 2009. For many people, saying goodbye to credit cards helps them stay out of debt and take more control of their finances.

Without thousands of dollars of credit at her disposal, Rozzi no longer makes purchases with money she doesn't have. Today she pays for most items with cash and spends less. She says cash transactions make her think twice before making a purchase - significantly reducing her propensity for impulse purchases. A 2008 study led by Priya Raghubir, a professor of marketing at New York University, reinforced evidence from earlier studies that consumers tend to spend more money when paying with credit cards than they do when paying with cash.

To read the entire article from Daniel Bortz | U.S.News & World Report LP:
http://finance.yahoo.com/news/could-live-without-credit-card-133440415.html


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Hi my name is Philip J. Miano and I am the founder of PJM Personal Finance and Productivity Coaching specializing in Budgeting, Debt Reduction, Bank Reconciliations, Goal Setting, Time Management, and Organizational skills. Please visit my website: http://pjmcoaching.com.