Credit Score News, Tips & Advice
Website CertifiedPrivacy Protected

Back-to-Cash Meets Opposition

By Sally Maison
Published: Sunday, December 20th, 2009

The economy continues to recover, but no one can deny that it is still slumping. Since bad lending and borrowing practices led the United States to its economic downfall, some finance specialists say using cash for every purchase is the best move consumers can do. However, other experts are against this proposal, saying it could lead to some disastrous effects, including a ruined credit score.

Back-to-Cash Meets OppositionSome mass media personalities have been encouraging consumers to go back to making cash purchases, including Suze Oman, who encourages supporters to join her back-to-cash movement. She tells viewers to go back to those good old days when people pay cash for everything they purchased, encouraging them to stop using credit cards altogether.
With banks raising interest rates, cutting card limits, and charging additional fees, many consumers were easily taken into the idea. However, some finance specialists argue that going around with a plastic in the wallet and using it at the counter is still best for consumers.

Finance expert, Russ Wiles, says carrying a plastic can be very practical. He believes that they are very convenient and could be used to buy just about anything. He also adds that it is hardly safe to rely on cash or debit when renting a car or making purchases online.

Wiles further adds that a credit card can provide a consumer better protection when it comes to fraudulent or disputed purchases. He also says debit has a shorter grace period for use of interest-free money, which could be very important in some cases.

More importantly, a credit card helps a consumer when it comes to keeping or improving his credit rating. A person’s borrowing history and creditworthiness is summed up using a credit score, which affects the availability and interest rates of a loan. It also affects how much a consumer pays on his insurance, whether its auto or home. Paying a card regularly improves a credit score, a number which is very important especially on tough economic times, Wiles adds.

Wiles also remind consumers that part of their credit score is determined by their debt-to-limit ratio. It is the ratio of debts to the amount of credit limit a person has. A huge portion of that limit comes from their cards, and it could significantly go down if an account it closed.

Wiles tells consumers that there might be no need to close their accounts as Americans in general are showing better performance in terms of payment. TransUnion predicts that delinquencies will go down for all states next year, except Arizona. Aside from that, only 1.1 percent of all card accounts are 90 days delinquent, the consumer reporting bureau adds.

No Comments

No comments yet.

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.