How do I handle this?

[Pam in GA]

I'm leading small group discussion at an FPU class. I'm in the Atlanta area and many here have listened to Clark Howard for YEARS. (He's based in Atlanta and has a syndicated consumer type show, similar to Dave's but he talks more about being frugal.)

Clark dislikes debit/ATM cards and discourages their use. He encourages people to have one cc that is paid off monthly. I understand his logic, IF people have the self control to do that. However, as we know, many don't.

The problem I'm having is the reluctance of FPU class members to give up cc's totally. So far I've had no one out of a group of 27 cut up their cards. They seem to have the attitude of "I like most of what Dave teaches, but this is one area we'll disagree on." One member brought an article from the Wall Street Journal that supports Clark's position. I didn't get to read it, but she's bringing me a copy of it next week.

When they bring up this type of conversation, I tell them that it's ultimately their decision and that I'm there to encourage them to follow Dave's plan.

Any other advice on how to handle this? (BTW, we've completed the Dumping Debt lesson.)

[mindymc73]

I don't think they want it bad enough, yet.

I relate it back to myself. If I were great with money, I wouldn't be in the mess that I'm in. So I am using the knowledge of someone that's been down this road and back up it. Dave knows what it takes to pull yourself out of a financial mess because he's done it himself. So I trust what he says. It's like being an addict. For me, just having a card around is not a good thing. It's a temptation. I might avoid that temptation for a really long time. But then, something comes up. Something for which I could wait and save, but since I have the card, I'll just charge it. Maybe it's a needed home repair that's important but not urgent. Then something happens and I don't have the money to pay it off like I thought I would. Bam, I'm back in debt. Prov 22:7.

This stuff can take time to absorb. We are working on shifting paradigms, and that's hard work.

It goes back to "if you convince someone against their will, they're of the same opinion still."

Once we had our BEF in place, we had more in the bank than available credit on our card. Ask them how they will feel with a FFEF in place? Would that allow them the breathing room to feel comfortable cutting up their card? If they aren't willing to cut it up, are they willing to at least call and ask for lower limits?

I know others here will have better advice.

[cjohnston4]

Pam: Due to Clark's popularity in Atlanta, it will almost be like swimming upstream. Atlanta is his home base and WSB is a top rated station.

And yes, there is a ton of conflicting information from a variety of respected sources on the merits or their shortcomings regarding debit cards.

FPU is one of the few programs that advocates totally doing without credit cards. Even Larry Burkett and Ron Blue, while suggesting doing away with them, still say (said) if you're uncomfortable totally going without that it's ok. I believe the Crown materials still support that position. So Dave's position is radical. And it sometimes takes radical measures to change a problem.

I think Mindy's advice about relating back to yourself is excellent. While it may or may not encourage more to do away with the cards, it allows you to personalize it and possibly spark a discussion when the couple leaves that evening. Emphasize that you have done away with them and things seem to be ok for you, but that it's a choice and a choice that has worked well for you.

Don't suggest it's mandatory and don't seem condescending. Again, emphasize that you're following the program and all is well in your household.

As Mindy pointed out, those convince against their will are of the same opinion still. Some people who didn't cut up or give up their cards may in the future. Other who took the plunge may return to using credit cards at a future date.

I've found that most people won't totally embrace the program. You can even see that here. But if they embrace most of it, they will be far better off than if they only cut up the cards and do nothing else.

I think that sometimes we so focus on credit cards and the potential for danger that we forget the bigger picture of why most of us is doing this. Credit cards are maybe just one piece of the financial diaster many of us found ourselves in.

Good luck!

[Pam in GA]

Their reason for wanting to keep one cc is the concern about identity theft/fraud or hotel/car rental companies putting a hold on a larger amount of money than the expected cost.

One couple in the class last night mentioned that they had a fraudulent use of their debit card that took the bank 7 days to replace the funds. Even though the bank replaced the fraudulent funds and all NSF fees incurred because of it, they are wary of using a debit card.

[mindymc73]

Their reason for wanting to keep one cc is the concern about identity theft/fraud or hotel/car rental companies putting a hold on a larger amount of money than the expected cost.

One couple in the class last night mentioned that they had a fraudulent use of their debit card that took the bank 7 days to replace the funds. Even though the bank replaced the fraudulent funds and all NSF fees incurred because of it, they are wary of using a debit card.

If they travel, recommend a separate account for travel expenses with its own debit card.

As for the 2nd paragraph - that's why cash is king ;)

[William]

I think you handled it well. I wouldn't let it be a drag on the class or you.

It should also be noted, like it or not, there are legit concerns with using a debit card. Its not as simple as having fraud protection or bank policies that will correct the issue after the fact.

I don't advocate credit card use, nor am I opposed to debit cards, I'm just in favor of knowing the facts and being aware.

I always thought that a good alternative is to have a separate checking account with debit cards tied to it. This way, your direct deposits, other deposits, checks written, online bill payments, etc. all go through your main checking account, and all of your debit card transactions go through the second account. This eliminates any potential debit card issues from having an adverse effect on your primary balance/other transactions.

[cjohnston4]

Their reason for wanting to keep one cc is the concern about identity theft/fraud or hotel/car rental companies putting a hold on a larger amount of money than the expected cost.

One couple in the class last night mentioned that they had a fraudulent use of their debit card that took the bank 7 days to replace the funds. Even though the bank replaced the fraudulent funds and all NSF fees incurred because of it, they are wary of using a debit card.

This is one area where (from what I've read and I believe it was the WSJ article your class member may be referencing) the laws to fix the problems with identity theft favor a credit card over a debit card with regard to the time to fix the problem. If their money is all tied up in a checking account, including emergency fund like mine was early on, then they could be a sitting duck financialy for about a week.

[BzyBee]

If you really check Clark Howard's position you will find that he does recommend debit cards to those who have had problems with CC DEBT!! He has stated that the risk of using debit is worth it compared to the risk of falling back into old habits and accumulating debt on CC...so do some homework on Clark Howard's position and use it to back up FPU to your reluctant students.

I think it is fair to be honest and address the concerns about using debit cards exclusively. Debit cards are not the same and do not have all the same protections. I agree with Clark but substitute cash for the CC...we almost NEVER use the debit card (DH has a business card that he uses for travel so that is not an issue for us usually). It is also reasonable to show that there are many examples of folks who have lived many years with no credit cards and with no regrets but you have to know what you are doing with those debit cards.



In the end you are there to teach the program not to force compliance.

[SoundMind]

The problem I'm having is the reluctance of FPU class members to give up cc's totally. So far I've had no one out of a group of 27 cut up their cards.

I don't think this is a problem. Just move on and continue teaching.

As for me and my husband, we still own all our credit cards even though we haven't used them for 5 years now except for one for when my husband goes on business trips (his job reimburses the expenses when he returns).

I also don't think failure to cut up the cards is a sign of "not wanting it bad enough." My husband and I "wanted it bad enough" to change our spending habits. We still have our cards, but we don't use them, we pay with cash, and we are solidly on Baby Step 4. We have no incentive to use credit to live on as we have 3.5 months of emergency savings and great medical and life insurance. We keep the cards because of business travel and for credit reporting history. (We didn't start following Dave Ramsey because of credit card debt though; we had already been out of debt for 3 years before someone introduced us to Total Money Makeover last summer.)

Anyway... Don't focus on whether or not people cut up their cards. Focus on them getting so much out of the class they find themselves racing through the baby steps and paying off their mortgages! They'll remember your enthusiasm more vividly than they will all the details you'll cover with them.

[mindymc73]

SoundMind,
Out of curiosity, why keep so many cards, especially if you only use one for travel?

[BzyBee DH]

For online purchases (identity theft, etc) - I recommend virtual cards.

They are good for that one transaction and do not have your "regular" bank information.

link - http://www.livinglikenooneelse.com/forum/showthread.php?t=17858

For in-person purchases - cash is king!

Having/using a CC does not make one evil. Having/one using one does not mean the person is not following the DR process.

It is a very emotional issue and strong opinions abound.

[SoundMind]

SoundMind,
Out of curiosity, why keep so many cards, especially if you only use one for travel?
For credit reporting. A friend of mine is a banking manager and at a conference he learned some surprising things that affect one's credit rating. He told us that, unfortunately, having only one card actually lowered it. As much as I want our country to wean off FICO, dismantle the IRS, get rid of government handouts, it is what it is. I think Dave's money philosophy is great, but it doesn't run our economy, millions of horrible money managers do. So, I maneuver around the situation as it currently is.

I just signed a 15-year mortgage for my house this morning. We got a fantastic rate because our credit scores are over 810. Sure, it would be nice to get a fantastic rate because the lending institution sees how responsible we are with money, but currently, most institutions rely (too heavily, in my opinion) on credit scores.

BTW, we only have three cards: one for business travel, one joint, and one just in my name. And like I said, we don't use them to buy anything. We use cash.