Remember: Saving Is the Opposite of Debt

Daniel Gross' column notes that corporate debt has declined to the level of 2006. Households are also relying less on credit, and more on cash. Gross mentions a family that has gone "all-cash." He doesn't mention Dave Ramsey, and, indeed, the envelope system wasn't invented by Ramsey. Back when I was working at Money Concepts, we would sometimes talk up the idea of paying all your bills in cash. Budget a certain amount each month for each category, put that amount in a labelled envelope, and don't spend more than is in the envelope. One of the "enforcers" is that, as the food envelope, say, gets emptier, you'll shy away from blowing it all on dinner out, and you'll eat rice and beans at home.

I haven't gone all cash, and I don't intend to. I do use my debit card for a lot of purchases. I generally use only one bank credit card (and one gasoline credit card), and I keep the others in folders in a file cabinet. And I pay the balance every month, so I'm not paying out any finance charges. The key here, if there is a key, is that one should never use credit to buy something one cannot afford. That is, one should use credit to buy things for which one could have paid cash (with the exception of a house or, I would say, an automobile), and then use the cash to settle the borrowing immediately. A credit card should be a convenient way to pay, not a means of supplementing one's income.

Now, if we could just get the federal and state governments to go all-cash!

Looking for a Credit Card

One of the things I've noticed lately is that credit card companies have taken to closing accounts if I don't use the cards enough. So I've adopted a couple of tactics, like putting a monthly automatic payment on a credit card I don't use for anything else to keep it active. I took some little-used cards on a couple of trips lately, so I charged a few items on each one. But this article isn't about hanging onto the credit cards you have; it's about getting some credit when you have no record at all.

I think the most important part of this article is the following quote: "When lenders review applicants, they look at five factors: identification, account history, public records (bankruptcy filings, court records of tax liens), consumer statements (challenges to the status of an account with a lender), and inquiries. That last item is the most crucial for those of us with no credit: It shows how many times lenders have requested to review an applicant's credit history. The more times that information has been reviewed (and rejected), the more suspicious you look as an applicant."